Earnings call transcript: Vidrala Q1 2025 revenue falls, EBITDA margin up

Vidrala SA, with a market capitalization of $87.84 million, reported its financial results for the first quarter of 2025, revealing a revenue of €372.5 million and an EBITDA of €104.6 million. Despite a 6.6% revenue decrease at constant currency, the company improved its EBITDA margin to 28.1%, a 190 basis point increase. Vidrala’s stock price saw a modest decline, with shares falling 0.52% to €96.5, amid broader market challenges and evolving industry dynamics. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations.

Key Takeaways

• Vidrala’s Q1 2025 revenue decreased by 6.6% at constant currency.
• EBITDA margin improved by 190 basis points to 28.1%.
• Capacity utilization remained strong at over 90%.
• The company is exploring vertical integration and M&A opportunities.
• Energy costs are hedged at 70% for 2025.

Company Performance

Vidrala’s performance in Q1 2025 was marked by a decline in revenue, attributed to challenging market conditions and a decrease in volumes and pricing. Despite these headwinds, the company successfully enhanced its EBITDA margin, demonstrating improved cost competitiveness. The strategic focus on efficiency and productivity improvements, alongside capacity utilization above 90%, underscores Vidrala’s operational resilience.

Financial Highlights

• Revenue: €372.5 million, down 6.6% at constant currency
• EBITDA: €104.6 million, with a margin of 28.1%
• Net Income: €1.42 per share
• Net Debt: €289.2 million
• Leverage Ratio: 0.7x LTM EBITDA

Outlook & Guidance

Looking ahead, Vidrala expects similar or slightly better EBITDA performance in 2025, with modest volume recovery anticipated, particularly in Latin America. The company remains cautious, maintaining a prudent financial stance while exploring merger and acquisition opportunities to bolster its market position. No share buybacks are planned for the year. InvestingPro data shows analysts maintain a moderate buy consensus, with price targets ranging from $1.87 to $5.69, suggesting potential upside from current levels.

Executive Commentary

Raul Gomez, CEO of Vidrala, emphasized the company’s commitment to enhancing competitiveness, stating, "We are becoming more cost competitive than in the past." He also assured stakeholders of the company’s stability, noting, "Our business is safe, providing an outlook for the full year." Gomez highlighted strategic internal actions aimed at boosting competitiveness.

Risks and Challenges

• Market Demand: Persistent challenging demand conditions could impact future revenues.
• Competition: The rise of metal cans presents a potential market share threat.
• Energy Costs: While 70% of energy needs are hedged, fluctuations in energy prices remain a risk.
• Tariffs: Potential US tariffs could affect 2-3% of sales, posing a minor risk.
• CapEx: The intense capital expenditure program could strain financial resources if not managed effectively.

The company’s strategic initiatives, including potential M&A activities and a focus on vertical integration, are poised to navigate these challenges and capitalize on growth opportunities in the evolving market landscape.

Full transcript - Vidrala SA (VID) Q1 2025:

Conference Moderator: Good afternoon, and welcome to the conference call organized by Vitralla to present its twenty twenty five First Quarter Results. Vitralla will be represented in this meeting by Raul Gomez, CEO Inigo Mendieta, Corporate Finance Director and Unai Alvere, Investor Relations. The presentation will be held in English. In the Q and A session, questions will be also answered in Spanish. Nevertheless, it is strongly recommended to post questions in English in order to facilitate understanding of everyone.

In the company website, www.vitrella.com, you will find available a presentation that will be used as a parting material to cover this call as well as a link to access the webcast. Mr. Alvarez, you now have the floor.

Unai Alvere, Investor Relations, Vitralla: Good afternoon, everyone, and thanks for joining today’s call. As previously announced, Videra has released its twenty twenty five first quarter results, along with a presentation that we will use as a guide to entry session. We will start by reviewing the main figures, following the other slides. And afterwards, we will open the floor for your questions to discuss business performance much more in detail. I now hand over to Inigo, who will explain first quarter key financial highlights.

Inigo Mendieta, Corporate Finance Director, Vitralla: Thank you, Enai. Let’s kick off with the headline financials. In the first quarter of twenty twenty five, we achieved revenue of EUR 372,500,000.0, EBITDA of EUR 104,600,000.0, net income translating into earnings per share of EUR 1.42. And by the March, net debt was €289,200,000 implying a leverage ratio of 0.7 times our last twelve months EBITDA. As the anticipated price reductions of approximately 4% representing a 6.6% decrease at constant currency and like for like scope, as the anticipated price reductions of approximately 4% are already in place, while volumes remain down year on year, partly reflecting a strong comparable base in the first quarter of twenty twenty four.

Scope effect, which include the exclusion of the Italian business, had a 4.1% negative impact on sales. Looking at EBITDA in more detail. Applying the same breakdown, first quarter EBITDA reached €104,600,000 representing an organic growth of 1.4%, driven by greater diversification and the continuous optimization of our industrial footprint to further enhance our competitiveness. This performance translated into a robust EBITDA margin of 28.1%, marking an improvement of 190 basis points compared to the prior year. Here, we break down sales and EBITDA by business units based on the current perimeter, meaning the Italian business is fully excluded from last year figures.

As previously mentioned, we are seeing the expected price reductions across all regions, but the anticipated moderate recovery in volumes has yet to materialize, with Brazil being additionally impacted by negative currency effects. However, margins across all regions remained strong, reflecting the internal actions taken. And finally, turning to our balance sheet. Net debt stood at €289,200,000 with leverage at 0.7x the last twelve months EBITDA. This solid financial standing puts us in a strong position to invest, further enhance our competitiveness and explore potential opportunities while maintaining a prudent financial stance.

And now before we open the floor for questions, I’ll hand over to Rahul, who will recap the key points and share business perspectives for the full year.

Raul Gomez, CEO, Vitralla: Thank you, Ngo. Thank you, Nay. And thank you all on this call for attending this call today. Well, our results published today are probably a good evidence of the global context we are seeing and also of the Videla business we have created. This is the world we are living, much more challenging and much more uncertain than than we thought.

And this is also how solidly our business is reacting, better prepared and stronger than ever, a result of many strategic and man management actions. Indeed, our profitability during the first quarter of this year stayed under a reasonable level of control. Our and our competitiveness remained broadly solid at levels that I do consider should enable us to capture any recovery, any opportunity to grow if it happens. And these are the grounds why, despite the demand is evidently still quite softer than initially expected and also despite the macro uncertainties are rising, these are the grounds why we are today reiterating that our business is safe, providing an outlook for the full year that, in conclusion, in the end, reflects a guidance of similar or a slightly better EBITDA and free cash flow levels for this year 2025 versus the prior year. And this could be seen as nothing extraordinary, but it’s not as an an small thing for us.

As, let me remember, last year was a big year of us for us, a year of big change and relevant improvement. In the end, in my conclusion, what we want to share with you today is that the the business in the short term is under a reasonable reasonable level of control. And this is despite the many, challenges, the many difficulties that we are seeing here. This level of comfort, this starting point will, help us remain adaptive, looking forward to the future, trying to anticipate trends with a clear vision and a road map. A road map is tightly tied to our long term principles, customer, cost, and capital.

Repeat this to ourselves every day. That means that we will execute internal actions to improve our competitiveness. We will stay dynamic to capture opportunities, to analyze potential opportunities, and we aim to keep on investing more than in the past with our customer in mind to make our businesses stronger looking ahead to the future. And we will do it always with this decline, staying at reasonable low level of debts for a while. Thank you.

Unai Alvere, Investor Relations, Vitralla: That concludes our initial remarks. Let’s turn to the Q and A session.

Conference Moderator: And our first question comes from the line of Francisco Rizmartin from BNP Paribas. Please go ahead.

Francisco Rizmartin, Analyst, BNP Paribas: I have two questions three questions. And the the first one is, if you could be a little bit more okay. Probably more detail on why cost has been so, outstanding this this quarter with a better offer around 10%. And I’m following this, Nelly. If you are still thinking that your sales volume for the year, it’s gonna be something between, I don’t know, flat to a slightly grow, which, as you guided in in q four with cost, I don’t know if it’s gonna be 10% for the year, but it’s still outperforming last year.

It looks like the €450,000,000 of your guidance is should be understood as a as a floor. So I I don’t know what what’s my wrong on my calculation, but it looks a conservative figure. The second question is on on this on supply situation in Europe. So farther to the cuts that we saw last year, One of your main competitor has announced another two closures in, in France. Do you think that the current situation in terms of supply, thinking that the volumes will be flat or slightly growing, it’s, okay right now?

There is still an an oversupply situation that could be solved with, further closures. And last but not least, you mentioned that, that your next step in terms of m and a and acquisition, it’s, it’s gonna be last last in America. Would you be interested in a country like Argentina, or it’s something that you discard, on on from the very beginning? Thank you.

Raul Gomez, CEO, Vitralla: Thank you, Bakhom. Interesting and not surprising questions. Okay? First, regarding Kirst. Okay?

And what we have been saying over the last couple of quarters, you probably remember, is that we think that we are making a stronger business. We are investing more very selectively. That means that we are also divesting to improve our cost competitiveness. So I will say that understanding the normal reasonable level of volatility in our cost and our business, I will say that the cost levels that we are reaching are something that, at minimum, is sustainable. K?

Yes. It’s true. We are becoming more cost competitive than in the past. This is just a result of our deliberate straight strategic investment and management actions. Point related with the first is regarding the competitive landscape we are seeing in Europe.

We are put aware of a process of some capacity rationalization that is happening most of the cases far from our market of sales. We are not the cause of this. The cause of this is that the demand is lower than initially expected. Probably, you will agree with me that the the demand context has changed quite a lot. And suddenly, in the last two years, our narrative, the narrative across the packaging for the consumer industry was was quite different only two years ago.

And what we are seeing today is probably a process of rationalization that is only only closing the gap of preexisting overcapacity. I don’t think that the process is still over, and you can be sure that they will try to maximize our competitive levels as much as possible. And last question regarding m and a. In this point, our approach and our narrative remains the same. We are always looking for ways to grow the business.

You know that we are trying to create a platform for free to grow out in Brazil, basically in South America. We are today analyzing quite a number of potential opportunities. I will say that a bigger number than usual. This is and then maybe positive for how you see us because at least, let me clarify that that explains that we are dynamic. We are focused on securing the business as it is today, and there are much more challenging, demand context or macro context.

But we are also trying to dedicate a portion of our time to look at the future and to analyze potential opportunities. So that probably means that many of the rumors that you could was seen or you could hear in the future are some of them are right, but there is nothing more that we could add at this point as you can imagine. Okay? The only point is, please keep in mind that whatever you we do in terms of m and a, you won’t be significantly surprised. And our debt levels will, in any case, remain at particularly strong levels, low level of debts, strong financial position for a while.

Francisco Rizmartin, Analyst, BNP Paribas: I I just a just a follow-up. I think you didn’t answer the the first question or the second part of the first question on purpose on the on the guidance, but I understand that clearly the 04/1950, we should understand as a as a floor under the current situation.

Raul Gomez, CEO, Vitralla: Thank you, Baku. Difficult to say. You know, the first quarter of year, in reality, has been slightly slightly. Okay? Nothing extraordinary.

I think slightly worse than initially expected in terms of demand conditions for us. K? And our results for this third quarter is very evidence of this. K? So, it’s difficult to say is our guidance is conservative or not.

We normally don’t like to express this type of qualifications, but what I would say is that our guidance has been calculated after a deep conscious internal analysis and under the similar circumstances of redundancy and aggressivity that we we have always that we will have always yeah. Overly done. So if you take a look at our track record in terms of accomplishing guidance, probably at that conclusion to your answer.

Francisco Rizmartin, Analyst, BNP Paribas: Okay. Thank you very much.

Conference Moderator: Our next question comes from the line of Natasa Brilliant from UBS. Please go ahead.

Natasa Brilliant, Analyst, UBS: Thank you very much for taking my questions. So you said that the first quarter had been slightly worse than expected in terms of demand. Can you give us a bit more color in terms of volume versus price for all of the regions in Q1? And also an update on what you’re seeing in terms of demand by the different end markets or by region? Just any more color that you can give us on those demand trends.

And then my second question is around the energy pricing. Can you give us some indication of what the pricing was like in Q1? How much is hedged? And what we should think about for the full year, please? Thank

Inigo Mendieta, Corporate Finance Director, Vitralla: Thank you, Natasha. So on your first question regarding prices volumes. So at the group level, we are seeing volumes down in the range of 3% for the first quarter. Prices down in the range of 4% as expected, probably. And then we have on top of that the scope and the FX effect.

Okay? If we take a look by regions, all regions are roughly in this minus three, minus 4% in terms of pricing, again, as expected. And volumes are similar in Iberia and Brazil, slightly down in the range of minus 1%. And volumes in The UK are down minus 6% in the first quarter. Okay?

Let’s consider also that, which is relevant that volumes in q one twenty twenty four last year in The UK were growing by 10%. Okay? So there is a kind of comparable effect. And then in terms of energy hedging, as always, please remind that more than 50% of our sales are secured through long term agreements, k, with with big customers that include, what we name, POPs, price adjustment formulas that somehow give us visibility in terms of margins. And then, additionally, nearly 70% of our energy exposure is hedged through derivative instruments, which is more than 80% if we exclude Vidroporto that is is closely tied to puffs.

And for 2026, around 70% of our position still remains deliberately open. Okay.

Natasa Brilliant, Analyst, UBS: Okay. Thank you. And just to come back on the demand trends, anything you can say by the different end markets? So beer versus wine versus spirits, anything on that?

Inigo Mendieta, Corporate Finance Director, Vitralla: So by by segment performance is quite quite similar. We have seen slightly better performance of beers in the first quarter, but probably the first quarter due to calendar effects, to the Easter period, etcetera, is is not very much representative. Okay? Probably, we will be able to have a better picture on on the first half. But beer is slightly better than wine.

Natasa Brilliant, Analyst, UBS: Okay. Thank you.

Conference Moderator: And our next question comes from the line of Inigo Eguskiza from Kepler. Please go ahead.

Inigo Eguskiza, Analyst, Kepler: Good afternoon, Raul, Inigo and Unai. Thanks for taking my questions. I have another two. The first one is a follow-up on the volume strength that you that you that you mentioned in Euro, by regions. I don’t know if you can elaborate a bit the minus 1% we have seen in in Iberia, especially up to the the positive trend that we saw in in the last part of of 2024 now to to see the volumes again on the negative territory.

If there is something else behind the calendar, it still break last year in March versus this year in April, any any any reason would be very helpful. And then, the second question that I have is on the, Raul, you mentioned on m and a, a lot of opportunities, but the question is more on the on the CapEx number that you are giving. I think you put on the on the presentation that it’s gonna be intense in 2024, ’12 percent of our sales, which seems a bit high compared to what you have been investing over the last three to five years. If you can elaborate a bit on the breakdown of this 12% over sales CapEx. Thank you.

Inigo Mendieta, Corporate Finance Director, Vitralla: Thank you, Inigo. So in terms of volumes for the first quarter and specifically in terms of Iberia, there is nothing especially to worry, okay? I think proof of that is the guidance we are officially issuing today that, again, probably the year has started slightly weaker than expected in terms of volumes, but but we continue to anticipate that 2025 should be a year of modest volume recovery across the group, probably with better prospect in Latin America than in Europe, where we, since the very first start of this year, were expecting somehow flattish volume contribution for for this full year, and this is aligned also with the guidance that we have we have issued today. In terms of CapEx, as you were mentioning, we are guiding for a 12% CapEx figure in 2025. Obviously, more than half of of that is, let’s say, pure replacement following our furnace repair schedule.

But, obviously, as I was saying, there is an additional effort, okay, focus on many things, I would say, productivity improvements, differential services, as you know, energy efficiency, and and and vertical integration.

Raul Gomez, CEO, Vitralla: Thank you, Nino. And just adding of this, we are aware of the fact that, okay, CapEx levels today are higher than in the past, and it’s something that needs further clarifications. So thank you, Nino, for giving us the opportunity for us to do this. K. As Nino said before, the minimal maintenance CapEx in this business in our business as it is today is probably half the figure we are investing.

The other half is improvement, expansionary CapEx, CapEx to capture sales, CapEx to verticalize the business and gain control over the business, to gain control over our future, and CapEx to improve cost competitiveness. And you can see that these efforts are paying back. We are seeing the first signs of the results behind these CapEx levels in our cost competitiveness. We will maintain high CapEx levels for a while. At the same time, I do not consider that these CapEx levels are the normal levels in a in a business like ours to be significantly significantly lower.

But I do firmly think and defend the idea that is now the time, the opportunity for us to invest more than usual as long as our cash profile remains safe. We do have a calendar of to replace existing facilities. When we need to replace existing facilities, this means that we need to face extraordinary opportunities, and we are trying to take the benefits of these extraordinary opportunities. But let me conclude that we will keep on investing as needed as much as our margins are under control and as much as our cash profile remains safe.

Inigo Eguskiza, Analyst, Kepler: Okay. Thank you, Raul. Just a very quick follow-up. I know that last year, paid this extraordinary dividend on top of the ordinary dividend, but any reason why you are not announcing, the usual annual buyback that you have been doing for the last few years? I don’t know if it’s because of this higher CapEx or potential m and a, or or is there any reason for for for for not making a a buyback again in in 2025?

Thank you.

Raul Gomez, CEO, Vitralla: Thank you, Inyo, for the proposal. Okay. We are obviously analyzing the opportunity always, as we have done in the past, to, pay back return cash to our shareholders in any potential deals. But let me say that the server buyback is not something that we do consider usual or recurrent. It’s something that we do consider extraordinary depending on business conditions.

Is now that is now the time for us to keep it calm to take some time after the many changes that we have seen, say, enjoyed over the last twelve, fourteen months. You would agree with me that the macro context is more uncertain than usual. And, okay, you you have heard that saying that our CapEx will be particularly intense this year, and we are analyzing keeping very dynamic potential further opportunity. K? If things keep under control as they are today, you can be sure that we will analyze continuously potential opportunities as share buybacks to return back cash to our shareholders.

Inigo Eguskiza, Analyst, Kepler: Okay. Gracias. Thank you, Raul.

Conference Moderator: Our next question comes from the line of Luis Toledo from ODDO. Please go ahead.

Luis Toledo, Analyst, ODDO: Yes, thank you. Thanks for taking my questions. Most of them have been already addressed, but maybe just one regarding the blackout yesterday in Spain and Portugal. I don’t know if you’ve done an initial assessment. Should we expect any impact in second quarter?

The second question is relating to FX hedging. You have in Brazil natural hedging. Looking at the assumptions on your guidance, I don’t know if you I mean, if you’re considering any additional hedging policy on FX on the Brazilian real, specifically. Thank you.

Raul Gomez, CEO, Vitralla: Okay. Thank you very much, Bruno, for the first question.

Bruno Bessa, Analyst, CaixaBank: And we

Raul Gomez, CEO, Vitralla: were we were expecting this one as you can imagine. Let me say first that so far today, we are recovering, normality in our affected, industrial sites. Let me also say and remark that this extraordinary incident affected 45% of our production or industrial footprint. These are the five sites we have in Iberia but the group is becoming bigger, more diversified. And that means that we are less impacted, less exposed to this type of extraordinary issues even after this one was really extraordinary and unexpected.

At the end, we have lost probably one day of production or 45% of our installed capacity. It could have been a serious issue for us, but most of our all, actually, of our emergency protective facilities worked well yesterday. Something that also help us to keep on keep keep on, sorry, investing as we are doing because the facilities that worked well yesterday were facility that had been invested recently over this, let’s say, intakes intense CapEx period. And okay. Finally, you you shouldn’t be concerned about the this in our specific case.

And, indeed, our guidance that we are publishing today for the year was calculated days before this issue was not changed.

Inigo Mendieta, Corporate Finance Director, Vitralla: And then, Luis, on your second question, FX, let’s say, hedging policy in Brazil. As as you know, we remain convinced on the fact that we are generating cash in in Brazil in Brazilian reals. We have debt in Brazil in reals, so we have natural hedge in in that sense. And, obviously, we will have a translation effect into our consolidated accounts, into our consolidated numbers that should be inherent or natural to our exposure to Brazil since acquisition of the report. K?

Regarding the guidance or the assumptions behind the guidance, what we tried is to not make any assumption. K? Our guidance is based on average exchange rates year to date, and this means that we would like you to to understand the that the guidance could be met in local currency or or at least that performance in the different regions could be in line or exceed guidance behind the the the final number. And then we should also consider the impact of effects in the different regions.

Fraser Donlon, Analyst, Berenberg: Thank you very much.

Conference Moderator: The next question comes from the line of Manuel Lorente from Santander. Please go ahead.

Unai Alvere, Investor Relations, Vitralla0: Yes. Hello. Good afternoon. My first question is just a clarification. I believe that it was Inigo that mentioned that embedded on the full year guidance assumption was still a positive volume growth for the full year.

That’s correct? And if that is the case, which is going to be the trigger of this improvement in in volumes, it’s the market share gains from efficiency and improved demand? Thank you.

Inigo Mendieta, Corporate Finance Director, Vitralla: Thank you, Manuel. So, yes, you were right. We are still expecting 2025, as I said before, to be a year of modest volume recovery. K? We are not seeing significant reasons to be optimistic, and we are always talking about group level.

K? We expect to be to see some volume growth at at a group level and probably more driven by by Latin America, by Brazil. K? Obviously, first quarter is not especially representative in terms of seasonality. Again, it also has calendar effects this year as always.

So probably by the April or by the first half results, we will have more visibility. But I can also anticipate that when we look also or include April in the figures, are seeing some modest recovery almost elsewhere. K? We we remain or the message remains similar to that issued at the start of the year that we shouldn’t see volume decreases for the full year. Please also do not expect significant volume contribution, positive contribution.

Unai Alvere, Investor Relations, Vitralla0: I see. But in in any case, q two or the first week of q two validate a little bit this, let’s say, improved, volume strength?

Inigo Mendieta, Corporate Finance Director, Vitralla: Probably too soon to validate, but, let’s say that it’s in the right in the right direction.

Unai Alvere, Investor Relations, Vitralla0: In the right direction. Okay. And and just my final question. It is fair to say that given the fact that, let’s say, the the the the open part of the energy headwind weighted more on the first half than in the second half. If natural gas prices remain at this level, you should benefit a little bit more on the second half than in the first half.

That might help it might help a little bit to offset potential, let’s say, sticky softness in volume?

Inigo Mendieta, Corporate Finance Director, Vitralla: Yes. So, as I said before, we are around 70% hedged for 2025 for the full year, let’s say. But, obviously, hedging was slightly higher than that for the first quarter than for the remainder of the year. K? So we could benefit more in the remainder of the year if energy prices go down.

But also please consider risk has two sides. So will the benefit more or even be more effective if energy if gas prices go up, okay?

Unai Alvere, Investor Relations, Vitralla0: Okay. I see. Thank you.

Conference Moderator: Our next question comes from the line of Bruno Bessa from CaixaBank. Please go ahead.

Bruno Bessa, Analyst, CaixaBank: Yes. Good afternoon. And two questions from my side. And the first one, if you could provide a bit of color on the market share dynamics between container glass and other materials, particularly real meaning can we to understand if the request is already recovering some market share lost over the the recent years and also the price gap between the two materials, if it is already and if the gap is already being closed in terms of pricing. So a bit to understand the dynamics between the two segments.

And and and the second question on on margin evolution, just trying to understand the the dynamics in in in Continental Europe and in Brazil. And because after q four last year that was strong in terms of margins for continue to do and you kept margins in in q one above 30% in a quarter that in theory is not seasonally strong quarter for Continental Europe. So what I’m trying to understand here is the new normal for Continental Europe is to have margins in the low thirties going forward. So this will be about Continental Europe and then a bit of the same about Brazil because then we saw a relatively soft margin in Brazil in Q1. Of course, just trying to understand a bit why the margin came at 40.6% and significantly down year on year in Q1.

And also looking a bit to the delivery of margins over the most recent quarters. We saw that last year the strongest quarter was was q one. And then afterwards, obviously, also due to seasonality, but it seems like margin there being more in in the range of 40%, which is pretty much what it is also in Q1. My question here is, do you feel that the margin improvement in Brazil or the room for the margin improvement in Brazil is limited at this stage. And then at that end that this 40% thresholds is difficult to improve much more from from here or or there is something here that that affected particularly q one, and you believe that going forward margins could be higher in Brazil?

Thank you very much.

Inigo Mendieta, Corporate Finance Director, Vitralla: Okay, Bruno. Let’s see if I can touch on all all your points. So regarding margins, especially in Iberia and Brazil, as far as I understood, okay, probably the difference in those in those regions is also by differences in terms of dynamics, in terms of prices and costs. Prices, as I said before, in all regions are down near 4%. In Brazil, are more in this range of 4%.

In Iberia, slightly better than that in the range of 3%. And this is also a consequence of how costs are able to performing in those those two regions. Okay? We are seeing better improvement in Iberia because of recent investments and because of change of our, let’s say, footprint or or realignment of our footprint, closing the furnace in in in in in Jordan, Northern Spain, and having more capacity in Brazil, as Raul previously mentioned. And in Brazil, we are seeing still not that, let’s say, that benefits from that we are seeing in Iberia.

K? Besides that, I would invite you to consider margins in a longer, let’s say, term. We see structural margins of Iberia in the range of 28 to 32%, so we are more or less in the middle. We see margins in Brazil also in the range of forties as structural. But, obviously, when we look at quarters and especially when we look at business units or segmental information that is quite specific because these are not big business units or big regions.

It’s Brazil, which is exclusively two plants. It’s The UK and Ireland, which is exclusively another two plants plus the voting facility in Bristol. And it’s Iberia, which is five plants. Okay? So probably our divisions are very small, and this means that when we look at quarterly performance, in some cases, small, let’s say, effects can distort results.

K? And let’s consider that we are more or less in all our regions, probably excluding The UK, where this 21% for q one is still can can be still improved for the full year. Given that, we usually talk about the my a range of between 20 to 25% as structural in The UK. But let’s say that in the rest of business units, we are quite at optimized levels in terms of margins.

Raul Gomez, CEO, Vitralla: Thank you, Nico. I’m gonna take in back your first, the first part of your question. You asked us about our vision regarding the rise of, metal cans in our food and beverages packaging industry. We are monitoring more carefully this thing. It’s very evident so far that with our cans has front has in some markets that are against glass everywhere in the planet, particularly in well developed areas.

This is probably the result of a past inflationary pressures that has that have affected relatively more the cost of manufacturing glass than the cost of manufacturing aluminum cans. And okay. And there beer or the beer segment and food and soft drinks, sorry, segments. But it’s our job now to make our product attractive again for customers in these places Because I’m sure that the our customers, front owners, owners, packagers, and us as consumers prefer glass as a packaging of choice. It’s all a matter of cost competitiveness, and this is where we are putting all our profits.

Some of our previous questions and looking at the recent developments that we have seen in the macro context, natural gas prices going down in a moment when aluminum is going up is something that should be a good starting point to be confident of this optimistic vision.

Bruno Bessa, Analyst, CaixaBank: So just just a follow-up if I may. Does that mean that the the further price declines should be expected next year, for instance, in order to to increase that attractiveness of glass against Omni? How do you think the price declines should be over this year?

Raul Gomez, CEO, Vitralla: But that that won’t be the reason. We will keep on, as we have done in the past, adapting our prices to the real cost of manufacturing our products, trying to maintain safe our margins to in order so we are able to keep on investing and creating a reliable future future to become a supplier of for our customers. So if the cost of manufacturing glass go down next year, if we keep on investing well, gaining cost competitiveness, that should be an opportunity for us to be aligned to the cost competitiveness of alternative alternative materials like metal cans. And what I’m saying is I I do feel optimistic that this is probably probably starting to happen. K?

We’ll see.

Bruno Bessa, Analyst, CaixaBank: Okay. That’s clear. Thank you very much.

Conference Moderator: Next question comes from the line of Fraser Donlon from Berenberg. Please go ahead.

Fraser Donlon, Analyst, Berenberg: Hi, everyone. Thanks for taking the question. So I’ve got four. So the first is just, I was wondering if you could give a feedback on the EPR in in The UK, kind of what your customers are saying about that. And the second part to that question, I know a few years ago, you had announced with Diageo that you would kind of expand your capacity with them in in The UK.

So is there any kind of update on that project? I know the the times have maybe changed, but but I just wanted to ask the question. The second question also linked to The UK, is it possible to kind of quantify if you expect any negative impact from the kind of higher social security costs for UK businesses as of April, whether that cost can be passed through with the contracts you you mentioned to your customers in in The UK? The third question, I’d just be interested to have your thoughts on kind of how tariffs in The US may or may not change kind of the import export complex for glass globally? You know, it’s it’s less glass going from China to US.

Is there a negative impact potentially for Europe or or not as as you see it? And then my final question, could you maybe answer what would be the kind of average age of the furnaces that you have within the group at the year end of 2025 post this kind of CapEx which you mentioned? Thanks very much.

Raul Gomez, CEO, Vitralla: Okay. That’s most of the question regarding our UK business and reflecting, the evidence that The UK industry many industries in The UK are suffering a process of hyper regulation that could put a risk, the future of the industry in The UK. In our specific case, I think that things are pretty much under control. You are seeing our numbers in The UK. You are seeing our forecast, our guidance for this full year, and this guidance is calculated consistent with our expectations in The UK.

Please take a look at our performance in our business since we acquired Enserc ten years ago, approximately, and, okay, you will probably have a have a higher level of comfort. Okay? Regarding EPR, this is a new example of an abnormal level of regulation, something that we rely, we trust, will change, will be moderated in the future. We are trying to work well, particularly with our customers. Most of them are more impacted than we are.

We do whatever we can to help administrations, politicians recover a reasonable level of common sense. But if not, our numbers and our margins are still under control and consistent with our guidance. Regarding the project we had to better serve, expanding capacity, one of our most steady customers, not only The UK, globally, the name you mentioned. What we can say is that this project was based in serving them more products, a better cost, more competitively competitively, and the reasonably quality service and products products that are made more sustainably with a better level or improved level of sustainability. And we are doing the same.

That don’t need not need don’t need to be a particularly new investment exclusively dedicated to them. K? What our customers need from us is for us to make our products and serve our services in the most competitive and sustainable way, and this is what we are doing in this specific case. And the last question and another case of, excessive regulation against the future of The UK industry, in the case of social security, we are aware we are aware of that. The impact of this is fully captured in our guidance.

And, actually, we do have an expected process to increase our competitiveness in the CERT, reducing our cost that should fully offset the impacts of this and the other negative regulation that we are seeing so far. In conclusion, we probably feel today more confident that we were that we were only a couple of months ago regarding the future of Encirca, our UK business.

Inigo Mendieta, Corporate Finance Director, Vitralla: Then Fraser on on Ustai. So it’s difficult to be precise at this stage, as you can imagine, even the uncertainty around how and when they might be implemented. That’s okay. That said, we have assessed the potential impact on the segments that could be most exposed, which is primarily primarily wine, champagne, beer, and olive oil exports from Iberia and France. And based on our analysis, just to put just to try to put some figures, we believe that the potential impact on group sales should not exceed 2%, three %.

Raul Gomez, CEO, Vitralla: Yes. Starting on this phrase, sorry. Yeah. We are pretty aware of the fact that tariffs are dedicated out of time for you, your work, and we are analyzing all the potential impacts. Let me say that one thing looks like evident.

The worst case for us, the worst impact is reasonably limited, understanding the domestic nature of our business in our three different core regions. And, secondly, it looks like I don’t know where it will end, but it looks like, this story, the tariff story will end differently than how it started, probably in more moderate circumstances. And the final question you asked us, this is a very good question about the average life usage of our facilities, particularly our pharmacies. Let me say without giving you an specific detail because this is something that is very sensitive for our competitive position, that is significantly below average. So we are investing more and better.

This is giving us a result.

Fraser Donlon, Analyst, Berenberg: Thank you for the comprehensive responses, Kai.

Conference Moderator: Next question comes from the line of Enrique Jawas from Berenberg Securities. Please go ahead.

Unai Alvere, Investor Relations, Vitralla1: Good afternoon, Raul and you and Mike. Just two questions. The first one is the message that you announced in terms of capacity rationalization. So what is your spare capacity in the different business regions, and how do you expect to evolve throughout the year? And secondly, also in The UK, I mean, being talked a lot of, you know, the sector overcapacity in Southern Europe, but it seems that volumes in The UK are performing weaker than than in in Iberia.

So I would like to know your opinion about the the mismatch between supply and demand in Iberia versus the The UK. Do you think there’s a still a large difference in Iberia in terms of oversupply or is tending to to perform more possibly without a big difference between those two regions? Thank you very much.

Inigo Mendieta, Corporate Finance Director, Vitralla: Thank you, Kike. So first first one on capacity utilization. You can consider that during Q1, the group production capacity utilization was slightly above 90% with capacity adjustments primarily focused on the division and The UK and Brazil both at levels near to full utilization. Anyway, we will continue to monitor demand as as you were mentioning, and and and we will maintain a disciplined inventory management in that sense. And in in in terms of your second question, as far as I understood because the quality of the line was not especially good, maybe you can clarify and Yeah.

Raul Gomez, CEO, Vitralla: Tell us.

Unai Alvere, Investor Relations, Vitralla1: About the, you know, the the sector overcapacity. We’ve talked about about the overcapacity in the South Of Of Europe in in Iberia, but it seems that volumes in the sector are being weaker in the in The UK. So I’d like to know if you still foresee a large mismatch in terms of supply and demand between those two markets.

Inigo Mendieta, Corporate Finance Director, Vitralla: What what we see Gigi, thank you. Thank you for the clarification. What we see is that probably demand conditions are similar in both Continental Europe and The UK and Ireland. Probably in The UK, we are somehow different. So we are more comfortable because of the visibility and the complementarity of the filling business, as you know, which is based on more or less stable volumes coming from outside Europe remote regions, and this gives us visibility.

But, basically, I wouldn’t give too much relevance to the volume performance in q one because, first of all, the comparison basis in The UK last year was very high. As I said, volumes grew plus 10% in q one, and this was not the case of Iberia, and this is basically the main reason behind that.

Unai Alvere, Investor Relations, Vitralla1: K. Thank you, Anil.

Conference Moderator: There are no further questions by the telephone at this time. And I hand it back to David Rallatin, who will address questions submitted via the webcast.

Inigo Mendieta, Corporate Finance Director, Vitralla: Thank you. So we have received several questions via webcast on tariffs, on cans, on CapEx. I think all of them have been answered. If not, please do not hesitate to contact us after the call. But there is one that we haven’t still answered.

And it’s based on the potential implications for the European glass industry of the French competition authority investigation. And, also, if we foresee a potential risk of that investigation extended into an EU context. Thank you, Igor. And, yes, we have asked for information under the terms of this investigation. There’s nothing more that we should add so far,

Raul Gomez, CEO, Vitralla: but just to secure that we will help provide an an immediate information under the terms of this process. And let me remind you that this is a quite competitive context industry. And in our particular case, a relevant portion of our sales volumes are dictated by long term supply agreements with prices calculated the following, specific k specific formulas. So we’ll help out providing any needed information, and we will keep you updated in case any relevant happens.

Unai Alvere, Investor Relations, Vitralla: We have now we have now addressed all the questions submitted via webcast. If you have any additional queries or you require further clarification on any point, please don’t hesitate to reach out to us. We are always happy to assist. That concludes today’s session. Thank you for your thank you for your time and attention.

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