Earnings call transcript: Verallia Q1 2025 sees revenue dip, cautious outlook

Verallia, a global leader in glass packaging, reported its Q1 2025 earnings with revenue reaching €818 million, marking a 2.2% decline year-over-year. The company’s adjusted EBITDA also saw a significant reduction, down 27.9% to €147 million. Despite a challenging market environment, the company remains optimistic about its long-term prospects, although it has revised its adjusted EBITDA guidance downwards. Following the earnings announcement, Verallia’s stock price showed a modest increase of 0.55%, closing at €29.26. According to InvestingPro analysis, the company appears undervalued, with a "GOOD" overall financial health score of 2.92 out of 5.

Key Takeaways

• Revenue decreased by 2.2% year-over-year to €818 million.
• Adjusted EBITDA dropped by 27.9% to €147 million.
• The company launched hydrogen-powered furnaces, aiming for an 8-10% reduction in CO2 emissions.
• Verallia revised its adjusted EBITDA guidance to approximately €800 million.
• The stock price saw a slight increase of 0.55% post-earnings announcement.

Company Performance

Verallia’s performance in the first quarter of 2025 reflects the broader challenges facing the glass packaging industry. Despite a decrease in revenue and EBITDA, the company continues to innovate with sustainability initiatives like hydrogen-powered furnaces. The European market showed slight growth, while the Latin American market remained supportive. However, geopolitical tensions and cautious customer behavior contributed to a volatile environment.

Financial Highlights

• Revenue: €818 million, down 2.2% year-over-year.
• Adjusted EBITDA: €147 million, down 27.9% year-over-year.
• EBITDA Margin: 18%, a decline of 641 basis points from Q1 2024.
• Net Debt Leverage: Increased to 2.3x from 2.1x at the end of 2024.

Outlook & Guidance

Verallia has revised its adjusted EBITDA guidance for the year to approximately €800 million, down from €842 million. The company expects to generate free cash flow exceeding €200 million and anticipates high single-digit volume growth. Capital expenditures are projected to remain below €300 million, representing over 8% of revenue. Despite these adjustments, Verallia remains cautious due to market uncertainties.

Executive Commentary

CEO Patrice Luca emphasized the importance of agility in the current market, stating, "Agility and adaptation is gonna be the keyword." He also noted that market conditions are tougher than expected, but expressed confidence in generating significant free cash flow.

Risks and Challenges

• Geopolitical tensions creating a volatile market environment.
• Potential impacts of U.S. tariffs, affecting 6-9% of total sales.
• Energy cost variations impacting profitability.
• Capacity utilization challenges in key markets like the UK and Germany.
• Market uncertainties leading to cautious customer behavior.

Q&A

During the earnings call, analysts focused on potential impacts of U.S. tariffs, energy cost variations, and the company’s strategies to improve capacity utilization. Verallia’s management clarified their approach to pricing and market conditions in light of these challenges.

Verallia’s Q1 2025 earnings reflect the complexities of operating in a challenging market environment, with a focus on sustainability and strategic adaptation to maintain its competitive position. For deeper insights into Verallia’s financial health, valuation metrics, and growth potential, access the comprehensive Pro Research Report available exclusively on InvestingPro, which covers over 1,400 top stocks with expert analysis and actionable intelligence.

Full transcript - Verallia (VRLA) Q1 2025:

Tristan, Conference Coordinator: Hello, and welcome to Verilya q one twenty twenty five financial results analyst call. My name is Tristan, 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 question 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 one on your telephone keypad. I will now hand you over to your host, Mr. Patry Luca, to begin today’s conference. Thank you.

Patrice Luca, CEO, Verallia: Good morning, everyone, and welcome to our call for Q1 financial results. As usual, Natalie and I will go through our presentation and we’ll have the Q and A session. I will share with you some key highlights, and Natalie will present in detail our numbers, and then I will be back for our guidance. So to start with, just to remind you that Verallia 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 2,024 split of our sales by segment. And as you already know, one of our strongest 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 Gillette recycling centers, allowing us to control about 50% of our needs for external collect.

So let’s move to some key highlights of our Q1. The first 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 nearby ArcelorMittal coking plant and made from a byproduct of coke production. We have signed with ArcelorMittal a five years 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 six megawatt. This will allow a CO CO two 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 Comprobond.

The heat up of the furnace will be done in few weeks for first production by the end of H1. This additional capacity will allow us to pursue our growth in a dynamic Brazilian market. And this new furnace, a new advanced OxyCombition technology, will operate with 18% CO2 emission reduction compared to a traditional furnace. So 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 solution is the lever we want to push. Here you have four good illustration of what we lately accomplished. One new rose bottle, which was one of your output of our French designer one. In UK, this new gin bottle.

In Italy, a nice single serve proposal for a non alcoholic beverage, Saint Benedetto. And last in Brazil, a 600 millimeter returnable beer bottle for Abbender. By doing so, we are leveraging the full capability of glass as a packaging solution and demonstrating our ability to support our customer. Let’s move now on let’s move now on the some Q1 business impact. So about 2025 market situation, we can say that destocking impact in most markets is now ending, and we can say that the growth is not 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 Verallia, we experienced volume growth impacted with negative year on year inflation spread due to carryover from 02/2024 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 UK and Germany, in Q2, we are planning a gradual back to normal use of our capacity in Europe, but ready to to adapt again with agility if necessary, especially being vigilant of the real output conclusions of a tariff between U. S. And Europe.

In Germany, we have decided to launch an additional project to adapt our workforce for a restructuring cost of about EUR 10,000,000. And as usual, number four, productivity and cost control are at play as part of our DNA with PAP, delivering again in Q1 ’2 point ’3 percent 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 EUR $818,000,000, with organic growth at minus 3.6 year over year. Q1 adjusted EBITDA is EUR 147,000,000, minus 27.9% versus last year, with a margin of 18%, minus six forty one bps versus Q1 twenty four. And about net debt leverage is at 2.3 at the March compared to 2.1 at the end of last year. So let’s see now with Natalis a little of our numbers.

Natalie, CFO, Verallia: 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 move we delivered sales of EUR $818,000,000 to be compared to EUR $836,000,000 in Q1 twenty twenty four. So the organic growth in this quarter is negative, minus 3.6%.

If we exclude Argentina, it’s minus 4.3%. You can see here in the pillars the usual pillars of our bridge that volumes contribute positively as Patrice just commented, plus EUR 24,100,000.0. So you have an 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 EUR 59,000,000. We have a decrease in average selling prices year over year and some mix 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 EUR 6,500,000.0. Here, it’s mainly coming from Brazil.

The perimeter impact, 24,500,000.0, is mainly linked to the new plant in Italy acquired in July 2024. And you have separate the Argentina variation of minus EUR 1,400,000.0. So all in all, good momentum in volumes, but not sufficient to offset the negative pricemix. So how does this translate into adjusted EBITDA? We have so an adjusted EBITDA for the quarter of EUR 147,000,000 to be compared to EUR $2.00 4,000,000.

And that leads, as you can see on the top right, to a margin EBITDA margin of 18% to be compared to twenty four point four percent one year ago. So here, again, the usual pillars to explain this variation. So we have a positive activity pillar, plus EUR 18,500,000.0. So we have here a positive impact from the sales volume, the organic sales 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 quarter 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 EUR 86,200,000.0. So we have seen we have lower selling prices and mix, negative mix 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 €12,500,000 additional EBITDA. The other pillar is the combination of parameter effect, some SG and A reduction, but partly offset by some positive one offs that we did have last year and that we don’t have this year, but quite limited in amount at €2,300,000 The effects you have again mainly Brazil and Argentina as a separate pillar for minus €1,300,000 So as a conclusion, the decrease in our EBITDA compared to Q1 twenty twenty four is mainly driven by spread. At the end of the quarter, so our debt is pretty stable versus December 2024. We have a decrease in the last twelve months adjusted EBITDA.

So our leverage is a bit higher than 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 December. We have a comfortable available liquidity at EUR 9 and 27,900,000.0 at the March.

Patrice Luca, CEO, Verallia: Okay. So thanks, Natalie. So about our guidance. So 02/2025 has started with uncertainty and volatility and marked with a sub European consumption and rising global tensions. As we speak, we still see a demand slightly up in Europe and remaining stronger in Latin America.

However, market conditions are much tougher due to the global environment. And in this context, so we do update our adjusted EBITDA target. For now, we expect to be around EUR 800,000,000 from a level close to that of 24,000,000 which was €842,000,000 initially. And we are confident to generate free cash flow of more than €200,000,000 compared to around €200,000,000 initially, free cash flow, again, being our key focus for 2025. So thanks a lot for your attention, and let’s now move to our Q and A session.

Tristan, Conference Coordinator: Thank you, Mr. Luca. As mentioned, we will begin with the Q and A with the audio question. We’ll start off with Ms. Louise Weiser from UBS.

Your line is open.

Louise Weiser, Analyst, UBS: Good morning. I’ve got a few questions, please. So firstly, on the guidance 2025, what drove the cut to the adjusted EBITDA guidance? Is it linked to the strong negative price cost spread in Q1 or the outlook on tariffs or something else? And what does your new guidance assume in terms of scenarios for the years for the current year?

Is there any indirect impact from tariffs on the volumes included in there? Then secondly, on volume and price for full year 2025, you said in the past on volumes probably low to mid single digit growth in 2025 and on price, single digit decline from the carryover and again low single digit decline from the additional price cuts. How do you see volume in price for full year 2025 now in light of your new guidance? And the last one is around the price cost spread in 2025. Strong negative impact on EBITDA in Q1 from the pricecost spread.

Can you give more color on what happened? I think you mentioned more inflation costs. How much negative could this be for the full year, please?

Patrice Luca, CEO, Verallia: Okay. Thanks a lot for your question. So about our guidance and the slight adjustment we did on the EBITDA level, It’s mainly due to the market condition, but we see much tougher than expected. Again, we have the good news on the volume side. But on the price mix and especially on the mix, we see some negative impact that we had in Q1, especially, I would say, in January and February, but even again expected in March.

The good news is that we see March we had a March which was quite supportive in terms of volume. We see that again in the quarter. So on the volume side, we are quite, let’s say, confident with the different initiatives we have taken, but with some impact on price and mix, let’s say. And you’re right, we were expecting to make it simple a mid single digit increase in terms of volume with a mid single digit impact in terms of price and mix. And now we see much more volume to be, for Verallia, high single digit.

And few additional points negative in terms of price and mix compared to our initial initial expectation. And so your questions about the tariffs and the trade tension between your US and the rest of the world, I mean, frankly, nothing has been really taken. Just what we observed as we speak today because the first difficulty we have is to understand what is the assumptions to be taken. Mhmm. And as you know, you can go to bed with one information and wake up in the morning with a different information or even having something which seems to be clear on Monday, and you have the opposite on Friday.

So and with our customer, it’s about the same. I mean, they are so the main keyword is really agility and adaptation. This is why, by the way, we are cautious in production in Q1, and we are paying that with some less production contribution to our results in Q1 compared to what we do usually. As Natalie explained, in Q1, normally, we build some inventory for the high seasons to come in Q2 and Q3. Being cautious, we did not do that.

And we see some production upside to come in Q2 as we are going to restart. Except UK and Germany, as I mentioned, we are back to normal everywhere to face what we see as a peak season in Q2 and Q3. For the cost, Natalie?

Natalie, CFO, Verallia: Yes. For the price cost for the cost element in spread, you’re right. In Q1, we a negative in well, we have inflation in our cost, and we had some, I would say, one off effects with especially energy. If you if you recall, the spot energy prices have been pretty high in q one and are now down. So we are back to normal level, even reduced ones.

But in Q1, we had a negative impact from the energy mainly. And also in all our in the cost inflation that we see for the full year, that should be close to neutral or slight inflation, but again, not the same as in Q1. We will benefit from collecting deflation, and we don’t fully see that yet in the third quarter. But again, back to the more surprise, I would say, spot energy prices were were higher than expected in the in the first quarter. But that’s not what we see going forward.

As we speak today, energy is is again lower. So that’s that’s a good news for the rest of the year. We

Tristan, Conference Coordinator: now go to the line of Lars Kjellberg from Stifel. Please go ahead.

Lars Kjellberg, Analyst, Stifel: Yeah. Thank you. I just wanna get back again to q one. Again, the we appreciate the energy cost went up, of course. Right?

But, again, with your hedge portfolio, etcetera, it’s still very puzzling to see that extreme margin contraction of 650 basis points sequentially. You you gotta be able to provide some more color on that. And if so, of that 650 basis points drop, because it did speak to most of the prices, of course, have price declines happen in the first half of twenty four and some incremental, but you didn’t have a top line problem here. So this is really a cost issue, it appears. So if you can provide some color, how do you expect that to reverse in q two?

And considering then, of course, the your guidance around 800,000,000, you need to have a real step up in margins for the balance of the year on the current revenue base to get there. And in the context then of uncertainty around the tariffs, are we comfortable with that? And then the final, could you just put us some color on that inventory variance, what it normally would have been as a positive contribution and also CapEx guidance in absolute number for the year, if you could? Thank you.

Natalie, CFO, Verallia: Yes. So you’re right. We are so energy cost, first question. Again, we are hedged, as you very well know, for a large part, but we always have 15% to 20% open to spot lots. So this is this element that was impacting our spread in the first quarter.

So we always have an open position. And in fact, we have a bit more open position. But again, normally, in our policy than one year ago, because one year ago, we we had lower production than anticipated. Here, we are really well adjusted. So we have we have these open elements, again, between 15 it’s it’s 15% and a bit more here in the first quarter, and that was impacted by the by the spot.

And, again, as we speak today, energy prices are down. So this portion that is open to spot, we are not penalized anymore in this first quarter. On the margin contraction, it’s not only the spread impact, I would say. Again, we did not produce as fully we did not produce with a full production. We were we had a slow start in Jan and Feb.

And in March, we had a good sales dynamic sales, but production was still pretty low. So again, we did not build the inventories that we usually would build in the first quarter. And so this has an impact on our margin because, basically, you absorb less fixed cost than what you would normally do by running and building up a bit of inventory in the first quarter. ’1 year ago, in Q1 twenty twenty four, we were building some inventories. So again, this fixed cost absorption is also weighing on your EBITDA margin.

So again, moving to Q2, Q3 and later in the year, as Patrice said, we are back with higher production. And so this will lead, you’re absolutely right, to an improvement also in the adjusted EBITDA margin. So this is also answering, I think, your question on the inventory valuation.

Lars Kjellberg, Analyst, Stifel: If you could just quantify that, help us to understand what that means because you did have a quite a meaningful positive on the activity pillar, right, which was 16,000,000 positive. So how would that have been had you had a normal production?

Natalie, CFO, Verallia: I’m not I’m not going to give you a a precise number here, Lars. Just again, it’s a specific impact in this first quarter. And again, we will improve in the second quarter and moving forward. Your question on the CapEx? About

Patrice Luca, CEO, Verallia: CapEx, Lars, so what we see and what you could consider forecast for this year is that we’re going to be below €300,000,000 So tightening, obviously, we see some depletion as well compared to all the overall plan we have on the CapEx side. So below EUR 300,000,000, which will put us in the range of 8% plus of our revenue.

Lars Kjellberg, Analyst, Stifel: We

Tristan, Conference Coordinator: will now move on to the line of Francisco Ruiz from BNP Paribas.

Francisco Ruiz, Analyst, BNP Paribas: I have two questions. The first one, I’m sorry to insist on this. On the cost side, I mean, Natalie, you mentioned that you are almost 85% hedged in energy, but you are also working at a lower utilization capacity. So as it happened last year, this spot acquisition of Energy is much lower right now than than it was, than it should be. So so how is possible to have a 5% cost inflation with, such a exposure?

And I don’t know if you could detail on on this cost if if there is also a a negative effect on on mix, and and you could quantify this. The second question is on on capacity utilization. If you could, remind what’s the level right now and how how much of your capacity is curtailed and give a little more detail on, Germany self help measures if this will come with a lower capacity for the future. And given that one of your main competitor has made a big restructuring in France as you commented, I don’t know if you are planning further movement on on that side. Thank you.

Patrice Luca, CEO, Verallia: Okay. So thanks a lot for for this key question. So just to clarify on the cost inflation. So the energy has quite significant impact to what we would expect in Q1. And compared to last year, you know that we are hedged hedging, facing some uncertainty on volumes of 25, we have slightly reduced the hedge part.

Instead of moving to 85%, we did 80%. So the non hedged part Q1 was much more 20% rather than 15. And if you compare the gas price spot level in Q1, and especially, it was very high in Jan and Feb compared to last year Compared to last year, we had significant impact here on the first quarter. And what we see as the good news to come, it seems that at the March, it has started to release. If you look at the number, Jan and Feb, the megawatt hour was around €50.

And as we speak, we are much more around €35. And based on what is happening on the geopolitical and market, the market market environment. For capacity, as as I commented, we are back to normal as we speak in every country in Europe except UK and Germany. So UK, we are still suffering from spirit market, which is quite low and with all the uncertainties and with with US tariffs. So in in UK, we are still one furnace which is not running on four.

And in Germany, we have one furnace in in in Belsdorf, which is not running, and we are making here a temporary adaptation. That means we have not made any decision for a definitive closure as the opposite of what we did last year in Essen. So Germany and UK are really the two countries where we are still suffering from nonuse capacity. For the rest of the countries, we are back to normal. In Germany, again, so we have decided not to do definitive capacity shutdown, but we have decided to adapt some cost base, on the workforce side.

And as I mentioned, we would plan for about 100 people for EUR 10,000,000 worth of going first. And this will take place at Essen in Germany, at Badger Plaque manufacturing site and some SG and A adaptation at the headquarter in Germany. For France, as we speak, we don’t plan any capacity adjustments. We see, again, that in France, we are back to normal. We have relaunched the furnaces.

We have some maintenance, which is a business as usual plan, but we are not planning, as we speak, for an additional plan.

Francisco Ruiz, Analyst, BNP Paribas: Okay. So so correct me if I’m wrong. So two furnaces out of the 50 something that you got is is only a 4%, five % production curtailed right now?

Patrice Luca, CEO, Verallia: Yes. This is a globally for the group, it’s about that. Obviously, with much more impact in UK and Germany.

Lars Kjellberg, Analyst, Stifel: Okay. Thank you.

Natalie, CFO, Verallia: And just back to come back on the on your question on the cost side. So we talked about energy, but there’s not only energy. We have also inflation on labor costs, for example. So here, nothing that is not anticipated. But as I commented, we are this is partially mitigated by some expected deflation on Colette.

And again, in Q1, we don’t yet have the full impact of that. So just to further give some further light on the cost.

Francisco Ruiz, Analyst, BNP Paribas: We

Tristan, Conference Coordinator: will now take from Mr. James Perry from Citi.

James Perry, Analyst, Citi: Good morning. Thanks for the presentation. I’d just like to ask about the global consumption trends and trade flows. And I know you talked about the improving European volumes and obviously a direct exposure in Europe and LatAm. But would you be able to comment a bit more on any changes in customer behavior in light of The U.

S. Tariff uncertainty? What are you hearing from customers regarding the export trends? And to what extent could a weak U. S.

Consumer hold back your volume growth in 2025, you think?

Patrice Luca, CEO, Verallia: This is the question. The assumptions we have, as we speak, is consumption being slightly up, globally speaking,

Lars Kjellberg, Analyst, Stifel: in Europe.

Patrice Luca, CEO, Verallia: What we see through the different strategy initiatives we have taken in different countries and in some segments, we see for Varia good momentum in terms of volume. We see volumes picking up in beer and non alcoholic beverage. The only segment which is suffering is much more sparkling. For discussing with the customers, frankly speaking, most of them are very cautious. They are a little bit of blind.

What we may see is some tactical and strategic behavior with this ninety day pause, I would say. But it’s really difficult to have a to have a to be definitive and to have a standard partner, to be honest. We we we don’t know. So, again, here, is key is agility and adaptation, being cautious in everything we plan, ready to adapt if necessary. Again, the good news is that we see we had a good March.

We see a strong April, so which let us which is giving us a good momentum for Q2, and we’ll see. And then you know as well that the weather conditions in Europe will be quite significant on Q3 and Q4 sales, so we’ll see. But we are not pushing for or making an assumption of a high conception or even pushy conception in Europe. We are quite cautious on that. And the result of our volume growth is much more related to the initiatives, as we explained during the full year results of the near We

Tristan, Conference Coordinator: will now take the question from Philippe Lorain from Bernstein.

Philippe Lorain, Analyst, Bernstein: Yes. Good morning. I just wanted to come back a little bit on your comments on the volumes. So maybe it’s just me, but you mentioned that volumes seem to play out the way you wanted. But you indicate as well that you would now expect a high single digit growth versus mid single digit before.

And at the same time, you mentioned that you had the negative effect from finished goods inventory in Q1 and that you will restart more capacity in Q2 except in Germany and The UK. So that strikes me as maybe the visibility has moved a lot or fluctuated a lot during the first quarter. Maybe you can shed some more light here. And also, when you speak about the volume trends, can you confirm whether this high single digit growth that you now expect for Viradia as a whole includes COSICRO or not? Is it in organic terms or not?

Thank you.

Patrice Luca, CEO, Verallia: Yes. So quite easy answer. Yes, it’s CORTICO is embedded in that. And you know that about CORTICO compared to last year, it’s 44% growth coming from this scope parameter effect with a good momentum, especially on beyond. About nobody, about your question.

This this is what we have just said. We have good volume provision compared to last year. So obviously, in H1, with a perimeter effect from COSCO. Keep in mind that in H2, we get the positive impact in Brazil as well with our additional capacity in Incorpore. And keep in mind as well that we have in our plan to start our special furnace in Italy for with Q4 impact with some good opportunity we see on the food segment.

So this is a plan we have as we speak. But globally, volumes are quite at a good level in terms of growth for us, but with tougher market condition to get this growth, make it simple.

Philippe Lorain, Analyst, Bernstein: Okay. And and and and that led you basically to still not pile up that much finished goods inventories at the end of q one because you expect to be able to catch up on that production in in future quarters.

Patrice Luca, CEO, Verallia: Yep. Yep. Okay.

Natalie, CFO, Verallia: And it’s also linked to the fact that it’s really March that was very dynamic in

Tristan, Conference Coordinator: terms of

Lars Kjellberg, Analyst, Stifel: Okay. Thank you.

Patrice Luca, CEO, Verallia: Welcome.

Tristan, Conference Coordinator: We’ll now move on to Jean Pierre from ODDOY behalf. Please go ahead. We’ll now take the line from Jean Pierre Young from ODDO BHF.

Francisco Ruiz, Analyst, BNP Paribas: This is

Jean Francois Laurent, Analyst, ODDO BHF: Jean Francois. Jean Francois speaking from ODDO BHF. Thank you. Jean Francois Laurent speaking from ODBHF. Just one question one question regarding the the pricing.

You mentioned on the press release that there is some during for the negotiation at the beginning this year, some decrease for the pricing with your discussion with the clients, customers. So could you give us some more color? And is that means that we should integrate some lower pricing on average for the full year, but for sure, the coming quarters for the coming quarters? And the other question is for the spread impact for the full year. How do we expect the level compared to the minus 200,000,000 last year for the negative impact on the EBITDA?

Should we consider that we could have the same magnitude or lower than that?

Natalie, CFO, Verallia: So Jean Francois, we won’t comment on pricing. We don’t give color on price versus evolution. In our spread, you have price and mix. So the comments won’t go further in our comments on what Patrice already said in terms of both. So again, in the volumes and price mix, overall, we are a bit better than anticipated on volumes and a bit less a bit worse on the pricemix as a whole, but no more detailed comment on these elements.

And overall, on the spread, we see not the same magnitude of spread impact as last year

Tristan, Conference Coordinator: But sorry. Okay.

Jean Francois Laurent, Analyst, ODDO BHF: But for already the negotiation, you confirmed some decrease for the pricing sorry? I just mentioned during your negotiation with the customers at the beginning of this year, you confirmed some decrease for the pricing. When we negotiate the new tariff for 2025, there is some decrease for the pricing. Is that right?

Patrice Luca, CEO, Verallia: Yes. Yes, sure. I mean, what we said about pricing is that obviously and especially when you are looking at the spread, we have the carryover effect of what we did along the year in ’24 plus the additional price reduction given in ’25. So and this is about it. And obviously, the spread is significantly negative in Q1 as expected.

I mean a little bit more than what we expected due to the tougher market condition I mentioned. And, obviously, it will reduce the volume down the year.

Natalie, CFO, Verallia: Yeah. And this is in Q1 where you have the largest gap between prices from ’24 and ’25. Because if you remember, we had some price mix going down last year in 2024 throughout the year. So this is in the first quarter that we see the the highest negative gap.

Lars Kjellberg, Analyst, Stifel: Yes. Okay. Okay. Thank you. Welcome.

Tristan, Conference Coordinator: We will now move on to the line of Nxjian Sun from Deutsche Bank. Please go ahead.

Vincent, Analyst, Deutsche Bank: Thank you very much for taking my questions. So two questions from my side. The first one is on the 2025 guidance. So you basically reduced the adjusted EBITDA guidance for 2025. But on the other side, you increased the cash free cash flow generation.

So how shall we understand the bridge between these two elements, or what are the drivers for the better cash generation for this year? And the second one is on the BSW I offer. Can you remind us what are the following procedures from here and the time line of the tender offer from here, please? Thank you.

Natalie, CFO, Verallia: Thank you, Vincent. On the let me take this one. Well, in fact, indeed, we are we moved from around EUR 200,000,000 of free cash flow generation to both. We see, again, in the first quarter, we were much, much well, almost neutral in terms of free cash flow. When one year ago, we were significantly negative.

And we know in the seasonality of our cash generation that Q1 is the lowest and then Q2 and H2 especially are much stronger, so we have a better visibility. And again, we commented on the on the CapEx and the investments. We know that the additional capacity the CapEx linked to additional capacity is basically behind that. And we have a lower CapEx spend and a better visibility today. So we are, again, confident on delivering more than than €200,000,000.

And we’re also working and seeing some good effects on work to optimize our working capital, especially on inventories other than finished products because you have finished products, but you have also other inventories. So all these action plans plus the context of the cash spend leads us to this above EUR 200,000,000 free cash flow guidance.

Patrice Luca, CEO, Verallia: About about the voluntary tender offer from BWGI, so you may have seen that BWGI have just filed this morning to the French Financial Markets Authority, the IMF. By the way, the information, all of this information will be available on our website today. So next step is that we’ll have a board of directors this Sunday to examine the offer. And as expected, the board will have to issue a reasoned opinion of the offer, having considered the report of the independent expert, Cabin Nerudo, by the way, my new, and the recommendation of the other committee. So this with an opinion and the independent expert report will be made public, and then we’ll have to wait from the IMF validating the offer, and then we’ll enter into the standard process later on.

Vincent, Analyst, Deutsche Bank: Okay. Thank you very much. That’s very clear.

Lars Kjellberg, Analyst, Stifel: You’re welcome.

Tristan, Conference Coordinator: We’ll now open the line for Fraser Donnan from Berenberg.

James Perry, Analyst, Citi: Yeah. Good morning, Patrice and Natalie. Thanks for the presentation. It’s Fraser here from Berenberg. I have some four questions.

So the first is quite an open one. I’d just be interested to understand your kind of view on, let’s say, a more direct impact of tariffs on glass and aluminum and how those two substrates interact. For example, you know, I think there was quite a lot of glass going from China to The US. So where could that land, going forward? The second question was just on The UK.

So I kind of be interested in how your customers are responding to, EPR and and kind of the increased cost of of glass effectively in in in The UK and and whether there’s any structural risk there for for Allied? The third question, could you just clarify what are the kind of cost savings relative to nonrecurring costs with this Germany kind of plan, which you mentioned? And then the fourth and final question is just on M and A. I think it’s obviously quite a dynamic environment in glass, for various reasons, and I just wondered kind of what’s your willingness or interest to participate in this potentially quite rich M and A environment? Thanks very much.

Patrice Luca, CEO, Verallia: Okay. Thanks a lot, Faiza. So, frankly speaking, on your first question again about the tariff, The question again is what is the assumption? We are seeking to make some study and define what could be the impact. So, I mean, again, agility and adaptation is gonna be the keyword there.

Let’s wait to see what are gonna be the definitive measure to understand our customer strategy and impact and as a consequence, the impact we have. I do not believe when you’re speaking about China impacted in the North American market that it has a consequence of additional Chinese import in Europe. Frankly speaking, I do not see that as realistic. No. But really, the market the glass market is a local market.

Obviously, you have a slight part of some imported product coming from faraway countries, let’s say. But this is a small part, and this is most of the time on some very standard products and for some one shot operation, I would say. So let’s let’s try to get better understanding on what is gonna be the reality at the end of this trade trade situation, trade war to make a definitive understanding. About UK, so you’re right. We have this EPR cost topic compared to overpackaging.

I so this is a this would be a concern for for for for for glass in UK. But here as well, we do not see any impact to limited, just started. And I would say that for Allied, especially, which is a platform, you know, dedicated Spirit. I do not I do not see any switch or any impact to come here. So, obviously, it will put maybe some pressure on pricing on our customer to the b

Louise Weiser, Analyst, UBS: b b

Patrice Luca, CEO, Verallia: two c market. So it’s much more how it is going to be high in terms of inflation, but I do not see for us any impact to come. Cost saving in Germany. So with what we are planning to do with this cost situation, it’s a positive impact of few millions and euros to come on the cost structure. And last, on M and A.

On M and A, so you’re right. Many some potential topics to come. Here, what we are as we have already said, we are on a permanent screening, trying to understand the opportunities, if they are, if they are and, again, if if time is gonna make sense, we’ll have a look on it. But as we speak, right now, it’s purely for us to to focus on on cash generation and to see what will be the next step in terms of M and A if value creation is secure.

James Perry, Analyst, Citi: Perfect. Thank you very much.

Tristan, Conference Coordinator: We now come to the last question for the audio participants from Louise Weiser from UBS. Please go ahead.

Louise Weiser, Analyst, UBS: Just a follow-up, please, on the price. Can you quantify how much of the price drop in q one at group level? So the the minus 6.3% is due to the carryover of the 2024 price cuts, And how much is due to the additional price cuts made in 2025, please?

Patrice Luca, CEO, Verallia: As Natalie said, do not want to comment more than what we already said on price and mix effect. I think we expressed ourselves on that. Market conditions are tougher than expected. This is a good sign on volume, and we see the price and mix effect being slightly negative than what we are expecting.

Tristan, Conference Coordinator: And with that, we will move on for the webcasting, which will be addressed by your host. Please proceed.

Patrice Luca, CEO, Verallia0: Okay. Hi, all. David Plasse speaking. I’m the Head of IR. We’ll have a short one this time around since we only had one contribution in terms of written question.

Just a short set of questions from Inigo Agusquita with Kepler. I think most of them have been answered, starting with there was one question on pricing trends, which I think we’ve addressed. Another regarding the impact of U. S. Tariffs, which we’ve tried to address to the best of

Patrice Luca, CEO, Verallia: our knowledge.

Patrice Luca, CEO, Verallia0: Maybe just two groups sales are or could be affected directly or indirectly by U. S. Tariffs? That’s the first question. And the second one relates to the BWGI offer.

And the question is, can you please confirm that the opinion on the offer using the independent export valuation will be given as soon as this Sunday? Or when will it be given?

Patrice Luca, CEO, Verallia: These are the two Okay. So about, I would say, our exposure to US tariffs, what we can say on that? You know that 60% of our sales are made with spirits and steel wine and sparkling wine. So this is mainly this part, which is potentially exposed. We don’t have direct exposure.

We have indirect exposure through our customer exporting to The US. And what we do estimate is that within 60% of our sales, between 10% to 15% max is exported to The US. So if you made the math, it means that total exposure of our sales is between 6% to nine percent. So total sales. So it means that after that, it’s based on what is gonna be the final output on the tariff imposed on European market, what is the variation compared to this current six to 9%.

So this is this is this is what we can say on that. On the PWJI offer, yes, as I commented, so we’re gonna have a board of director this Sunday to examine the offer. And then beginning of the week, after after this Sunday, information will be released and especially about the reason opinion coming from the conclusion of the call. So it will be available on the beginning of the

Patrice Luca, CEO, Verallia0: Well, thanks, Patrice. I think that’s it from my end. So I think we’re good.

Patrice Luca, CEO, Verallia: Okay. Again, thanks a lot for for your attention and for this q and a session. I wish you a good day. Take care. Bye bye.

Louise Weiser, Analyst, UBS: Thank you. Bye bye.

Tristan, Conference Coordinator: This concludes today’s conference. You may now disconnect.

Lars Kjellberg, Analyst, Stifel: Thank you.

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