Verallia,Courbevoie

Hello and welcome to Viralia First Half 2025 Financial Results Analyst Call. My name is Laura and I will 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 listener limit. 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 questions. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Patrice Luca, CEO, to begin today's conference. Thank you.

Good morning, everyone. Thanks for joining us and welcome to our H1 Financial Results Call-in. So 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 come back on our guidance. As an introduction, just to remind you that Zeralia is the 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 24 split of our sales by segment. And as you may already know, one of our strong assets is our customer base, more than 10,000 customers, and the diversified end balance and market in which we operate. We do operate in 12 countries, with 35 plants, with 64 furnaces. Please note also that we are running 19 toilet recycling centers, allowing us to control about 50% of our needs for external toilets. Let's now move to some key highlights. First, I would like to share will view the completion of two key investments in two new furnaces, two brownfields, one in Brazil and the other one in Italy. Both projects have been completed and production has started. In Brazil, in Campobon, the furnace was commissioned in May and is bringing an additional capacity of 330 tons per day. The objective here is clearly to develop ourselves in a sustained Brazilian market growth. In Italy, in Pescea, the second furnace was commissioned at the beginning of the month, providing an additional capacity of 300 tons per day. This additional market capacity will be dedicated to the growing segment for food. Both furnaces are using an ETOX plus OxyCombustion technology, which is providing a reduction of CO2 emissions by 18% compared to a traditional furnace. So these two furnaces are ticking two boxes. They will support our objectives of both organic growth and decarbonisation. Next key highlight is about our confirmation of the launch of our first hybrid furnace in Spain, Saragossa. In this case, it is not an additional capacity, but the replacement of an existing furnace. We do expect to operate up to 70% electricity and using oxygen instead of air for combustion. This furnace will bring a 55% reduction of CO2 emission compared to a traditional furnace. The plan is to heat it up in a few weeks from now at Salim Choufri. And clearly, after our full electric furnace launch in Komiak last year, this is clearly an additional step forward of decarbonization on that. We will take some time for this on the ground, and if we need optimization, and then we will enter in the step-by-step deployment phase align with our decarbonisation roadmap to reduce our Scope 1 and Scope 2 by 46% in 2030 compared to 2019. The third key highlight is about product innovation. You know that we have launched our AirRange product offer. We started with our 300g Bordelaise bottle and then with a new jar offer Objective of this range is to offer best-in-class lightweighting products. And lately, we have completed the range with MyAir. MyAir is a new standard for single-serve solution for 20-centiliter beverage with a disruptive weight of 105 grams. This product is aiming to address the ready-to-drink, non-alcoholic beverage or steel wine segment. With this new proposal, we are leveraging the full capability of Glass as a packaging solution and demonstrating our ability to innovate and support our customer needs. Last key highlight is about BWGI tender offer for the AliaShare. So, as announced last Monday, the offer is successful, passing the 50% threshold. And BWGI is owning now 70.31% of Veradia shares and 62.81% of its voting rights. The threshold of 50% being passed, as planned, the offer will be reopened at the same price of 28.30 euros. IMF issued yesterday a notice formally announcing the reopening from July 31 to August 13, and final results will be known just after the closing of this second window. The settlement delivery offer, or the initial offer, or the initial window, the first window, will take place on August 1, so at the end of this week. This step being completed will continue rolling out our strategic roadmap, focusing on creating new value, for our customers, employees, and shareholders. Before moving to, before giving the floor to Nathalie, a quick overview on Q2 and H1 results. The positive news are one, as seen in Q1 of volume recovery. Two, a stronger cash generation compared to Latio, which is one of the key objectives for 2025. And last, a rebound in profitability in Q2 of 457 bps compared to Q1. So in detail, Q2 revenue is down by 2.5% year-over-year, with an organic growth of minus 3%. with organic growth at minus 3.3% here over here. Q2 adjusted EBITDA is 204 million euros, minus 10.4% versus last year, with a margin at 22.5%, giving an H1 adjusted EBITDA of 351 million euros. with the margin at 20.4%. About debt, net debt, our leverage is at 2.6% at the end of June, compared to 2.1% at the end of last December. And finally, our net income is at 68 million euros, minus 45.6% compared to H1, giving an EPS of 0.76 euros excluding PPE. So let's now see in details with Nathalie the details of these results.

Thank you, Patrice, and good morning everyone. Let me leave you as usual throughout our second quarter and half year results. So let's start with the Q2 consolidated revenue variance analysis. So you can see here the bridge between our Q2 2024 sales that were €928 million and our Q2 2025 sales that are €905 million. So as said by Patrice, our organic growth is minus 3% in the second quarter and minus 3.6% excluding Argentina. You can see on this bridge that the volumes are contributing positively, plus 19.5 million euros, broadly in line with the first quarter, and knowing that in the first quarter we had a low-con base, which has led the gate in Q2. So, again, this is one of the positive highlights of the quarter, this positive volume growth. We have a strong performance in food and beer, and oil segments are showing positive organic volume growth. The price and mix is negative, minus 52 million euros. This is primarily reflecting the carryover from 2024 price reduction, still in this second quarter, and we have some negative mix impact. is negative mainly to Brazil, as Argentina is shown as a separate. And we have in this first half a perimeter impact that you will see because of the acquisition of the Italian business that took place in July 2025. So this leads for the full half year to this bridge. So an organic growth of minus 3.3% for the first half half-year and minus 3.9% excluding Argentina. Again, you can see continued organic growth in volume. We had a targeted commercial policy and nearly all segments contribute positively here with a specific outperformance in Latin America. I will come back to that. The price and mix is still strongly negative, so we see a bit the same shape as what we saw for Q2. So same comments with the camover effect from 2024 price reduction and the negative mixed impact. And again here, the very letter is about Corsico, so the business in Italy. So looking per region, so as the usual South and Western Europe, and Latin America. So here you have the revenue. So the reported revenue in South and Western Europe declined by minus 0.3 percent, but with a scope impact. So at the constant scope, we have a decline of minus 4.5 percent. We have higher even excluding the contribution of Corsico. So organic, higher volumes. And again, here, most segments report positive volume growth, with a little exception with sparkling wine that are slightly down. If we move to North and Eastern Europe, we can see here, so we have some forex impact. That is why you see two charts. That is quite limited. We have reported revenues declining by 6.4%. We have lower selling price in the market that is showing still some moderate signs of recovery. But again, recovery, we have slightly in H1 in the most segments, and in this region, and two specific mentions about premium syrup spirits in the UK that continue to be quite soft and so far still, and still wine in Germany in a difficult market environment. When we move to Latin America, so we have reported revenue declining in million euro, but still really linked to forex, so you can see a nice growth if you exclude the 4X impact. We have a strong moving growth in H1, especially in Brazil, with a good momentum in all segments and a strong performance in food jars and non-alcoholic beverage and beer. So how does this translate into adjusted APDA? So let's start with the second quarter. You can see on the top right the adjusted APDA margin. So for Q2, it's 22.5%. Let's remind that we were at 18.18% in Q1. So we have a nice improvement sequentially in the adjusted EPDM margin Q2 versus Q1. Even if, as you can see also, we are still behind 2024. That was at 24.5%. But again, a nice sequential evolution. We have here, you can see the pillars, the usual pillars, bringing us from 227 million euros one year ago to 204 million euros in the second quarter of 25. So the activity is contributing positively by 15.7 million euros. We have the effect of the volumes that we just commented. We have a negative spread price-mix cost in the quarter by 56.4 million euros. But even if we're negative and unexpected, we have a less negative spread in the second quarter compared to Q1. And this includes unfavorable impact You can see that the net productivity continues to contribute nicely, above the target of 2% cash production cost reduction. We are at 2.3% in this quarter, and that leads to 11.9 million euros. In the other pillar, 11 million, you have perimeter effect, so contribution of Corsico in Italy. plus a nice contribution of NGNA reduction in this quarter. And you have negative 4x for minus 2.6 and some decline, a slight decline in Argentina by 3.3 million. So again, as a takeaway, still a nice rebound in the margin versus Q1. So looking now at the full semester, We have an adjusted EDD margin on the top right at 20.4%. And again, a compound of the 18 and the 22.4%. So in the pillars, you have the activity contributing positively, 34.2. The spread is negative by minus 142.6 million euros. So you can see that Q1 was more negative than Q2. The net productivity contributing on target, 2.3% decrease in cash-cash production, so greening 24.4% million euros, sorry. And the other pillar that is also contributing positively, and then that leads us to the, with the forex in Argentina being slightly negative. So a positive impact from volume recovery. even if we are still, of course, suffering from the negative spread values. So by region, let's look at the adjusted EBDA and the margin. So in South and West Europe, we are at 20.6% adjusted EBDA margin. That is 243 million euro adjusted EBDA, so decreasing versus last year by 15.7%. So the same peel-out in the South and West Europe, so positive active EGC contribution, negative spread and positive PNP. And in addition, we have the perimetal effect of Corsico acquisition here. North and Eastern Euro grew rough adjusted EVA evolution. We are at 49 million Euro adjusted EVA in this half year. That is a decrease, a significant decrease by 36.6% in versus last year. And you can see that the adjusted DPTA margin is at 13.6% to be compared to 20% last year. So in terms of PILAR, then we have a positive activity contribution, especially in Germany, that is slightly and slowly recovering. But we have a strong negative spread. Again, lower selling prices and negative mix. That is quite significant in the region. In H1 in Latin America, so we had, we posted 59 million euro and the decrease versus previous year is linked to foreign exchange. And you can see on the top right that the agency DPD margin is a nice 32.2%, so a strong performance, even slightly behind last year. So, again, especially with activities up and the spread is negative, but much less negative, so we have a very nice performance in this region. If we move to cash elements, CapEx, we keep CapEx new under control at 6% of total sales. So it's quite new compared to previous year. It's a mix of different planning in furnace repairs. So we have a less busy planning, especially in H1 compared to previous years. And we're also at the end of our new capacity, new furnaces, so comparable in Brazil and Asia in the country that Patrick mentioned to you. These CAPEX, they include, of course, the rollout of Saragossa hybrid furnace that we just presented to you as well. Cash flow generation, as any positive news and positive amount in the performance in the first half, we have generated a free cash flow of 66.2 million euro. That is a significant improvement compared to previous year. where we started the year with a negative cash flow of minus 49.2 million. So we have a 115 million euro improvement here. And you can see the cash conversion is high at 70.5%. We have lower operating working capital outflows, and not only coming from CapEx VCR that you see here. And we also enjoy lower interest paid and financing costs and lower cash tax. So all of this converts again to a positive free cash flow generation. The leverage as a result of what we saw previously is at 2.6 times at the end of June. Let's remember that it's after a dividend payment that occurs every year in May, and that was €202 million, so explaining partly and mainly the re-leveraging versus 31st of December. Now, here the structure, our financial structure and liquidity. So, specifically to the tender offer from VWTI, we have here, you can see one line of 1.6 billion euro certain forms bridge loan. So, as already published and communicated, we have entered into a bridge to cover potential put exercise The first two bonds that you see on this page, so the bonds, the 500 million euro one from May 21, and the second one from November 21, 500 million euro. These two bonds are, I mean, the change of control that just occurred, that will occur on August 1, will trigger a possibility for the bondholders to exercise their So it's fully covered, as you can see, by the bridge of 1.6. And even more, let's remind that the third bond, the one of November 2024, is not under the change of control or closed. So it doesn't need to be covered by the bridge. And just sorry, the available liquidity of the group is at a nice level of 810 million euros.