Verallia,Courbevoie

Ladies and gentlemen, welcome to the Viralia 2026 Q1 Results Analyst Call. The call will be structured in two parts. First, a presentation by the Viralia Group Management Team, represented by Patrice Luca, CEO, and Christina Riesgo, CFO. Afterwards, there will be a Q&A session. During this session, you may ask questions in two ways, by submitting a written question in the box below the player or by joining the conference call and dial pound key 5 on your telephone keypad to enter the queue. I will now hand over to the management team. Please go ahead.

Good morning, everyone, and thank you for joining us. Welcome to our Q1 2026 financial results call. I'm pleased to have with me today Christina Riesgo, our new CFO. As usual, we will go through our presentation, and then we have the Q&A session. And after a quick introduction, we will go directly to our numbers with Christina and I will be back with our outlook for 2026. As an introduction, just to remind you, as usual, that Zeralia 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 2025 split of our sales by segment. One of our strongest assets is our customer base and the diversified and balanced end market in which we operate. We operate in 12 countries with 35 glass plants and 67 furnaces, serving 11,000 customers and producing about 18 billion bottles and jars a year. Please note also that we are running 19 collect recycling centers, allowing us to control about 50% of our needs for external collect. Before moving to our numbers, I would like to share an update on our industrial adaptation footprint which was announced in mid-February. As a reminder, we decided to adapt and reduce our installed capacity to align with the reality of current demand and to address overcapacity in the European market. Our three projects are progressing as planned and in line with local processes. In Germany, in Essen, the plant was shut down at the end of March. Negotiations regarding the social plan should be concluded in the coming weeks and are expected to involve around 300 terminations. In France, this concerns the closure of one furnace at our Chateau Bernard plant. This furnace has reached the end of its life and will not be rebuilt. In this case, the social process to finalize the voluntary residency plan is underway. The furnace is expected to be shut down by the end of H1. In the UK, the closure of one of the two furnaces that are not only planned is scheduled for the end of the month. Overall, these three projects are progressing as planned, with a full impact expected in H2. I let now, no sorry, before letting the floor to Christina, a quick comment about our financial numbers. So our Q1 numbers are showing a profitability up year on year and marking a first stage in the recovery of their highest performance. Q1 revenue is down by minus 2.4% year over year to 798 million euros. with organic growth at minus 1.2% year over year, with total volume being flat. Q1 adjusted EBITDA is 159 million euros, plus 8.3% versus last year, and with a margin at 19.9%, which is plus 197 bps versus Q1 last year. And about our net debt, our leverage is stable versus stable, last December at 2.7 times. So now I'll let the floor to Cristina for more details.

Thank you, Baptiste. So let's start with looking at the revenue reach based on the numbers that Baptiste just gave. Okay, so revenue came in at 798 million, down 2.4 year-on-year. which is a minus 1.2% organic flow. So looking specifically at volumes, trends in Q1 were overall stable, and they're fully in line actually with our expectations. So volumes were slightly down year on year at 0.4, where we saw growth in food jars and spirits, and that actually offset the declines we experienced in non-alcoholic beverages and sparkling wines. In Europe, the demand is broadly stable. As expected, volumes in Germany are down by double digits, but this is fully aligned with our industrial footprint adaptation. But excluding Germany, European volumes were growing at a low single-digit rate, and this is driven by the momentum in southern and western Europe. And then in Latin America, volumes are overall flat, And we saw low single-digit growth in Brazil, stable volumes in Argentina, and a high single-digit decline in Chile. Spirits actually continue to perform very well and confirm the positive momentum already observed end of last year, basically in Brazil, which is supported by our campo boom for next. And then beer and wine trends remain mixed across the region. Now, if we turn into pricing a mix, the impact was negative by around 60 million, almost 2%, okay, this is what's reflected on the bridge, and is coming from the carryover effect from 25, and some initial prices that we had to negotiate at the beginning of the year in a very different course environment, okay, from what we've seen today. Importantly is that this price mix impact is much less announced than in previous quarters. And actually we are confirming that we are moving into a normalized environment. And finally, foreign exchange had a slight negative impact outside Argentina, and it was mainly related to the UK and Ukraine. And there is no positive, there is no perimeter effect during the quarter. And we turn now to the Ibiza Bridge. What we see is a higher profitability and clearly fueled by a slightly positive spread and net productivity gains. So, I just did a bit that reached 159 million in the quarter, which is up 8.3 compared to Q1 versus last year, which translates into a margin of 19.9. So, almost 200 basis points higher year-on-year. The improvement is driven by three key factors. activity and operating leverage that were broadly neutral and were reflecting stable volumes overall. Second, after two years of a strong negative spread, the price-mix cost spread turned slightly positive in Q1, which is reflecting a normalization effect, right? That helped in particular by lower energy costs following the end of the very expensive 2022 hedges. Third, productivity delivered very strong this quarter, and net productivity reached 2.1% net of cash production costs. And that represents 12 million. And this is actually the result of continued discipline and operational initiatives and performance action plans across the group. And finally, SG&A was very well controlled, and all the teams pushed for reductions that were more than offsetting some one-off items that we saw. And effect was essentially neutral, excluding Argentina. So overall, this confirms that profitability is structurally improving, even in a still challenging commercial environment. So if we look at the net debt evolution and leverage, As of March 31st, 26, net debt stood at 1.9 billion, including 64 million of rights of use assets. So leverage remains stable at 2.7 times over the last 12 months adjusted EBITDA, which it can change by December 2025. So it's important to remark that they increased, I mean, they did increase versus the year end and moved back about the 700 million for the first time in several quarters, right? I would just mention a quick thing that actually net debt increased versus December 2025, but that was driven by normal Q1 seasonality, minority dividends that we paid in the Canary Islands, and then some third value movements on financial instruments, okay? But that doesn't change our leverage positions, which keeps us stable. And then finally, if we move to our financial structure and liquidity, I will just mention a few words. Our financial liquidity remains very strong and has a very good maturity profile, as you can see, with the first maturity in 2028. The value ratio of our debt is actually long dated and a significant portion is on our floating rate exposure to interest rate caps, which actually protects us from a short term market volatility. So our financial structure remains robust and very flexible and resilient, right? Which gives us the confidence visibility to execute our strategy and 2026 objectives.

Thanks a lot, Christina, for your comments. And let's move to the 26th outlook. So for full year 26, we do confirm our objectives in an economic environment marked by continued soft consumption and increased, obviously, geopolitical uncertainty. But subject to the absence of a significant deterioration of the situation in the Middle East, we aim to generate an adjusted EBITDA of around 700 million euros and a free cash flow of around 220 million euros, excluding the restructuring cash-out plan in relation to the Group Industrial Footprint Optimization Project. So we confirm our objectives, we confirm our guidance, and we remain focused on strengthening our competitiveness, cash generation, and delivery by, one, implementing our capacity adaptation plan, two, delivering enhanced PAP savings, and three, keeping CAPEX under strict control around 8% of our sales as we presented during the full year 25 results. So thanks a lot for your attention and now let's open the Q&A session.

If you wish to ask a question, you may do so by submitting a written question in the box below the player or by joining the conference call and dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, Please dial pound key 6 on your telephone keypad. The next question comes from Francisco Ruiz from BNP Paribas. Please go ahead.

Hello. Good morning. Welcome, Christina. So I have two questions. The first one is related to pricing. If you could give some, like, I know that you don't give, but a set number of prices, but if you could give us an idea of how prices are in the different geographies. And in this environment of high energy costs, taking into account that you and some of your very close competitors are fully head for the year, but not the small players in the industry, if you have seen some of those players and movements trying to put the prices above current levels in order to offset the energy cost? The second question is you have booked around 53 million euros provisions this quarter in your P&L. I was wondering how much of this is cash and also if this is the total amount that you expect from the restructuring plan to happen or we could expect something more in the future. Thank you.

Okay, thanks a lot Francisco for your two questions. I will take the first one about pricing and cost and Christina will take the second one. So about pricing, so you have seen that in Q1 result number we are around 2% as volume is being flat, we are at 2% for low single digit price reduction. um by geography obviously this is a mix of europe and latin in latin we are much more in an inflation situation so we have some slight price increase but you know the weight of latin in our business i think you can do all of that but so low single digit price decrease to make it simple in europe with uh 80 percent of an ego more than 80 percent of the negotiations already done and behind us, which is putting us in a situation we were expecting, which is a normalization of the spread of the price-mix versus cost. So you're right, you know that we are edged on energy and we are benefiting from that and being in a kind of cautious situation versus what is coming, especially with this Middle East situation. I cannot comment about competitions and what competition is doing, obviously, as I do not have any information except what is publicly communicated, but we do not communicate ourselves on that. So no more to say about that on my side, Francisco. For the 53 million euros.

So, yes, Francisco, as you were mentioning, we bought a 53 million restructuring provision, and that reflects our best estimate as of today of the one-off costs that we plan to have, right, on the restructuring program. So, as Patrice mentioned, the program is proceeding as planned, and it's fully in line with the roadmap that we communicated. Okay, so the measures are primarily people-related and focus on the moving structural costs in geographies where capacity utilization and demand dynamics no longer justify the current footprint. So these costs are actually largely cash-based and will be mostly absorbed in 2016, 2026, with a little reminder in 27. So thinking of the cash impact of Q1, I can say that it's, I mean, it's, Just a few millions, okay? Less than 10 into one. The plans are still... We'll see the structural savings coming towards the rest of the year, which means permanent reduction in fixed personnel costs.

Okay, and do we have an update of the savings? I don't know if you have commented already this is going to be one-one to the provision or something, a payback of one year or something like that, or could you give us more details on the savings?

So on the savings, so what we have is we are expecting, let's say, a net run run rate EBITDA again of around 20 million euros. And we expect to get that. We expect to get, obviously, as we expect full impact in H2, it's going to be in 26, 50% of that. This is what we have in our plan.

And it's included in the 700 million that you mentioned on the islands. Yes. Yes.

Okay, thank you.

The next question comes from Jean-Francois Grandjean from AutoBHS. Please go ahead.

Yes, good morning. Three questions from my side. The first one, could you come back on the volume? So we saw stabilizations for the Q1. Do you expect an improvement or not for the volume in the coming months? Second question regarding the spread impact, so we there is a negative impact for the supply but a neutral impact for the EBITDA during this first quarter to expect an improvement or neutral impact for the full year despite the decrease of the pricing. And the last question concerns the capacity in the European market. There is lots of closed reduction capacity with some closed furnaces. Do you consider that currently the market is well balanced or remain with some other capacity?

Thank you. Okay. Thanks a lot, Jean-Francois. So about volume for Q1. So as we said in Q1, we have flat volume. This is 0 minus, but we consider flat. We have a strong growth in food jars and spirits, which is offsetting a decline in non-alcoholic beverage and sparking wines. We have a low performance, a decline performance, I would say, in Germany, which was expecting, and in line, as it has been said by Christina, and in line with the adaptation plan we have put in place. In Latin America, overall, we are flat as well, but with, let's say, a low single-digit growth in Brazil, flat in Argentina, and high single digits down in Chile. And in Latam, spirits are performing very well and confirm the momentum, the positive momentum we had last year, especially in Brazil, while we see beer and wine more mixed in terms of evolution. For the rest of the year, we stick to what we said during full year, so we expect to be in a flattish situation. zero plus minus, so no big expectation on the volumes compared to last year for the to-go. We are very cautious about that and especially cautious in the current environment with the Middle East and to understand if inflation is back, is there any demand impact to come or whatsoever. So we are really vigilant on that, so no big change for this topic. On spread, we are exactly where we said we would be, which is you do remember that after two big positive year, 22, 23, two strong negative year, 24 and 25, we said that spread will normalize. This is exactly what we see. And we do expect that for the full year. So no change there. And about capacity, what I can say is that I do believe that we have still some overcapacity as a market, not well balanced between demand and capacity in North-East Europe, but we do consider that we have done are part of the job there, moving from, if you do remember, we used to add, at the end of 2023, 10 furnaces in Germany, and with the plan we have now, which is underway, we are going to move from 10 to 6 furnaces. So we do believe that we have done our job on our side, and that we are quite comfortable, I would say, with now footprint in Germany, with three plants, six furnaces, to do good business. For the rest of Europe, we see the demand and capacity much more balanced. So in our view, on our side, no need to go for much more adaptation.

Okay, thank you very much.

The next question comes from Saul Casadio from M&G PLC. Please go ahead.

Hi. Thanks for taking my question. So a couple. The first one is on the price-cost spread. Did you expect that to remain positive over the year? You mentioned normalization. I'm wondering whether that could be a positive contributor to the EBITDA breach for this year.

Thanks a lot. Again, this is what we said. We stick to what we commented in February. we see the spread, so price mix versus cost normalizing, which is, again, if you take the latest 22, 23, 24, 25, we had big positive and negative swing. Here we are saying that it's normalizing, and this is what Q1 is demonstrating, and this is why we say we stick to that for the full year. So it means it's going to be zero plus, zero minus, You know that in price mix versus cost, there is a mix which is quite complicated to predict and depend on the demand. So we'll see. But we clearly have the demonstration that compared to the past four years, there is a clear normalization. And we are back to our standard business model, which is the slack growth in activity. neutral spread, I would say, and then an improvement in profitability coming from self-help. Measure mainly PAP delivering more than 2% cash cash selling. So we are back to something which is much more standard.

Okay, thanks for clarifying this part. And in terms of your volume performance, I just want to double check. You said minus 0.4 for the volumes in the quarter overall. Just want to check that, and also if you can give us a sense of the market performance if you were in line with market above, below, just want to have a sense of the market overall.

So I do confirm on the volume side of Q1, this is what you said, so it's flat. And again, it's flat. Germany being strongly negative, but I mean expected and in line with our plan. So it means that in some other regions we have much more positive developments in Europe. Latam as well is again flat, with Brazil slightly up and Argentina flat and Chile down. So this is what we see. And compared to markets, it's always complicated to position as we speak. because we do not have really, as we speak, the market, and we cannot speak about market share or category share whatsoever. What is positive news for us is that we are aligned with what we said and planned at the beginning of the year.

Okay, so roughly in line with market. Last one, if I can, is just a clarification in terms of the cost and savings associated with the closures of the three furnaces. You mentioned 20 million as cost savings that you expect to see. You already mentioned the cash cost, but I just want to clarify what the number is.

The cash cost for the closure. is what we announced in February. It's between 40 to 50 million.

Okay. Sorry. I just want to repeat that. Okay. Thank you. Thank you very much. Welcome.

The next question comes from Manuel Laurent from Santander. Please go ahead.

Yes. Hello. Good morning, and welcome, Cristina, to our small community. My first question probably is on hedging, energy hedging. You commented that you are fully hedged for 2026. And my question is more related to 2027, whether you have made some proactive actions given the current backdrop or whether you can give us some initial thoughts of the amount of hedge that you have for next year.

Okay, Manuel. And just to correct, we are not fully edged for 26. We are edged around slightly above 80%. Just to correct. And this is aligned with our edging policy, which is for a year plus one, at the end of a year, for a year plus one, I want to be covered by 80%. For the year plus two, 40%, and for the year plus three, 20%, and this is a rolling policy. So we are fully aligned with that. So we have about 20% of our energy cost for 26, which are following the spot price, just to clarify. To about 27, so we are in a situation to apply our aging policy. But since March, to be clear, due to the uncertainty and the volatility, we have made a pause for 27, waiting for a better understanding of where the energy is going to land, especially on the gas side. So for 27, we have already taken some aging position. but taken from 26 and taken from beginning of year, Jan and Feb, and no more since March. We are in a kind of pause mode, as we speak. Hope it's clarified.

Okay. Okay. Okay. Thank you. So maybe I'll follow up on this. Can you remind us, Patrice, please, what is the amount of PICE pass-through or direct pass-through mechanism of on your contracts as a presentation page or whatever number you can provide us?

It's about 15 to 20% of our business, which is managed under Pass-Through Formula.

Okay, great. Excellent. So my second question then is, I believe that Cristina mentioned the 11 million euros net productivity gain on this year. My perception, and correct me if I'm wrong, is that the 20 million euros delta of new savings for the rebounding of the European business are not included. in those 11 million euros so it's just to confirm to double check that this 20 million expected savings are something that we are going to see in coming quarters yeah manuel i i confirm so we as as we were mentioning we are still closing negotiations so

Yeah, Manuel?

Yeah. Could you hear us?

Yeah, yeah. Yes, yes, now. Yeah, sorry.

Oh, okay. So I was just mentioning that I confirm the $11 million doesn't include any benefit from the risk.

Okay, great. So that is the... Sorry, go ahead. So, then my final question then, since we expect an acceleration or a solidifying of these benefits from the cost-cutting plan, we have seen a very nice 8% EBITDA improvement year-on-year. However, the guidance imply a flattest performance for the full year. This is because, I mean, you want to be conservative at this point in time because to some extent Q1 results has been benefiting from some easier comes from Q1 last year. So I wanted to double check with you at this point in time why with Meaningful close to double-digit EBITDA improvement? Guidance is still pointing to a fattest performance year-on-year?

So, first of all, we guide on a full year basis. We are not guiding by quarter, and it's already a nice exercise. One. Two, obviously we have a solid performance and we are quite satisfied with Q1, which is in line with what we expect for the full year shape, but it's just one quarter. And this quarter, you're right, we have a positive comparison base compared to last year. Let's see how it's going to develop. But as we speak, we are in line with what we committed on. Our plans are on the way. And we will see how Q2 is confirming our plans or not. And we will be back in H1 or in July for H1 results. We will see if we have to update or not. But based on the uncertainty, volatility, what is in front of us, sticking to our full year guidance is our stance today. Let's see. It's just one quarter. Three quarters to go.

Okay. Thank you. Welcome.

There are no more oral questions at this time, so I hand the conference back to the speakers for the written questions.

Okay, thanks a lot, and good morning all. I'm the head of IR. We have a few written questions that I'll share with you now. The first one comes from Antoine Laurent. Question being, if I remember well, your expectations for 26 for price was towards zero for the full year and mix was still a question mark. I'm wondering if this Q1 price mix cost spread, so slightly positive, was expected. It would be, it would like, it looks like it would be some unexpected upside so far. Basically, expectations for the full year price mix

So the answer is yes, it was expected. Again, keep in mind that what we said, we expect in 26 normalization of the spread. Again, look at what was the result of our spread in 22, 23, 24, 25 with big swing up and down. Here we are speaking about the normalization. So what we have in Q1 is what was expected. But again, we are not managing on a quarterly basis, we are managing on a full year basis, and what we said is still valid for the full year. With the caveat of the mix, again, that we do not control. This is why we are saying normalizing.

Great. Thanks, Patrice. Another question from Shamir Shah. Can you talk about industry level? capacity closures for this year or planned for this year? I guess planned probably we can't, but I mean, I guess maybe we can have a quick update on what, on the recent announcements.

Yeah, so plan, I don't know, we'll see. What we know is with the latest announcements and especially the one which came last week or the week before, I don't remember, with Aardvark in Germany, Since 2023, since the end of 2023, we are up to 25 furnaces closed, still to come in 26, the final date, but 25 announcements made, which is at the end an equivalent of 2.2 million tons of glass, which is about 10% of the total production gas in Europe. So this is quite significant.

Thank you, Patrice. And then a final set of questions from André Giuseppe Frey. Four of them. The first one relates to energy prices. The question is, what are your scenarios for energy prices, and how confident are you to keep full your EBITDA guidance given significantly higher energy prices? How do you mitigate the impact? That's the first question.

So about energy impact, again, thanks to our edge policy, we are exposed about 20% of our energy cost, which is, so we can make many simulations, but with what I would consider as a, a central scenario, the impact on energy costs is not so material, I would say, compared to a full year impact. We are speaking about something which will be below double-digit million euro for us. But again, this is according to what we have as a view today. Obviously, what is much more complicated for us to... to simulate is what is everything related to logistics and cost and all of that. And it could be somewhere, something similar, worst case. So this is what we have. And in terms of pricing, we are monitoring all of that. So far, no pricing adjustment related to this Middle East situation. But obviously, if it will last, we'll have to move and make a kind of surcharge at a point of time. But so far, nothing done, nothing planned, waiting and observing the situation.

Thank you. The second question, I guess you've just answered it, actually relates to pricing. So how do you expect pricing to develop in 26? But I guess that's been... Yeah, this is what I've just said. No more comments. And the last two questions relate to leverage and rating. The first question is, where do you expect net leverage to end up by the end of 26? It is around 2.5 times a fair assumption.

So, look, I will not comment on a different or new guidance, so I will refrain to the earnings at the third half of the year. Okay, but what I can say is that definitely our capital allocation priorities remain unchanged, right? We have had a strong quarter in terms of cash innovation when the discipline affects, and we keep targeting to be leveraged by the end of the year, right? that there are no changes to the dividend mechanics. There will be no buybacks and no capacity projects, right? In the capital market, say in Q3, we would have the appropriate forum to address the medium term capital allocation. Okay, and then on, as I was mentioning, the first quarter follows typically a seasonal pattern with a bit of working capital absorption, but we've managed to contain our cash outflows. For the full year, we expect the cash generation to be weighted towards the second half. And with this, liquidity remains strong. I mean, and the leverage will obviously, during the month, it will hopefully go down, right? So we have a significant headroom, right, across our financing structure. And definitely our... Goal is, as we said in the press release, is to return to investment rate, but that's something that we don't control and we remain focused on execution, right, rather than agency decisions.

Great. Thanks, Christina. And that leads us to the last question, which actually you've just roughly answered, which was how confident are you that you can keep Moody's IG rating? i.e. how much time you have to improve credit metrics, et cetera. So, I mean, again, we're working towards that. We're doing the job, and I think that's it. So that is it for me. Thanks, Christina. Thanks, Patrice.

I guess we can... As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Saul Pasadio from M&G PLC, Please go ahead.

Hey, hi. Thanks for taking the follow-up. It's very similar to the question that's just been asked. So it's on your rating on the SMP side. Sorry, on the Fitch side. Sorry, on the SMP side. Sorry, it was... It was... I don't know if there's, yeah, on the S&P side. And basically, you're mentioning your release that, you know, you plan to return to investment grade, I guess also, you know, to regain IG status with S&P. Would you be able to put a timeframe in your plan to get back to IG on the S&P side?

No. Unfortunately, no. As I was mentioning, I mean, we are focusing on operational execution, deleveraging and cash generation. And we are in contact with FNOP and they also look at, they not only look at one quarter, right? So unfortunately, I mean, I cannot give you a timeframe, but what I can give you is that the leveraging and cash generation is definitely one, it's a priority and one of my main focus.

Okay, thank you.

The next question comes from Manuel Laurent from Santander. Please go ahead.

Yes, sorry, just a quick housekeeping-related type of question. Correct me if I'm wrong, but neither in the presentation nor in the press release I've seen any comment regarding the new dates of the capital market day. So I don't know what is your latest thought about this event. Thank you.

We are on it, Manuel. We stick to Q3, so we should come back to a precise date. We'll fix that for sure for our next release, working on that and trying to work on that, obviously.

Okay. Manuel, I would like to just clarify one additional point on the prior question on SNOP. the fact that we were downgraded, it didn't trigger any coupon step-up, okay, put option on an acceleration dose. So there is no immediate or mechanical impact on the cash interest payments for us with the downgrade, just to clarify.

Okay. Thank you. Thank you.

The next question comes from Fraser Fraser Donlan from Barenburg. Please go ahead.

Hi, Patrice. It's Christina Traylor here from Berenberg. I just have one question. I was wondering if you've seen any change in behavior of your customers as a result of the war in Iran, especially reading about kind of higher aluminum pricing, force majeure at some smelters in the Middle East. I was wondering if there's any kind of increased interest you start to see in glass as a substrate or not yet. Thank you very much.

Thanks a lot, Fraser, for your question. It's a good one. We are monitoring that, obviously, interacting with our customers. To be clear, so far, no change. I think for our customers, the biggest impact could be supply chain disruption and obviously them to bottle and to sell. But so far, to be honest and clear, no change, no major change. I have not observed that. It's a bit early to see that. Okay, thank you very much. Okay, so I believe that we have no more questions. So again, thanks a lot for your attention. We have quite a solid Q1, but it's just one quarter. You know, as I know, all the uncertainty, and from one day to be over, the geopolitical situation could trigger some impact on our business. But we will remain confident, according to the guidance we committed on earlier this year. And you have understood that we are really focused on self-help measures, strengthening our competitiveness, cash generation, and delivery regime, so So let's see. Thanks a lot again. And let's meet in July for a full H1 review. Thanks a lot. Take care. Bye-bye.

Thank you.