Verallia : Transcript de la présentation des résultats annuels 2022

FY 2022 Results

Thursday, 16th February 2023

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Verallia FY 2022 Results

Thursday, 16th February 2023

Introduction

Patrice Lucas: Good morning, everyone. I hope that you are all fine. And as usual, it is a privilege for myself and Nathalie to share with you our results. We are going to start with some key highlights of 2023 and then will go in the details of our financial results for 2022, and then guidance and Q&A.

We have updated what I can call our ID card, so now we have 63 furnaces, thanks to the acquisition of Allied, and with the furnace which has been started a few weeks ago in Jacutinga, in Brazil, and then we are present in 11 Euro countries, plus UK.

Going now with at least some key highlights. What I would like to share with you first is some data about the market. Here you see the market evolution from 2015-21, and we see that the market has been growing at a rate of 2.9%. Our internal estimation is that the market minimum, in a cautious way, is going to grow by 2% the coming years. You may have seen lately the data which has been released by the Open Federation of Glass which are showing that in H1 2022 compared to H1 2021 the global market in Europe has been progressing by +8% in tonnes and +8.5% in units. We are still seeing a dynamic market in front of us, especially in a tight supply environment.

Quick update on our key industrial projects. You know that these projects are strategic for us. Again, I will come back in a moment on Jacutinga, which was a big success, but we still have in front of us two new furnaces which are moving forward. One in Campo Bom, in Brazil, we are planning to start beginning of 2024 - you remember that we are going to launch an oxy- combustion furnace, which will allow us to reduce by 18% our CO2 emissions compared to a traditional furnace - and the second one in Pescia, in Italy, which is going to start in Q2 2024.

Then, lately, we have announced additional capacity to come by 2025 and 2026, one new furnace in Spain, and an additional one in Italy. This is clearly demonstrating our willingness to keep on growing, to keep on being able to grow along with the market growth we see and better serve our customers.

Capacity increase is obviously new furnaces, but not just new furnaces. As you know, we are working on a daily basis to optimise efficiency in each of our production lines, but as well we are working to what we call debottlenecking, which is working on our production lines to make sure that we are pulling as much as possible from capacity of the furnace. The job which has been done in the past months is leading to an additional capacity of 90 million bottles for all the segments and this will be beneficial for 2023 at least.

Then a quick update on our new technologies, which are key for our CO2 reduction roadmap. We are on track, first, with the electrical furnace that will be launched in Cognac. We are planning the first production by the end of this year. And our hybrid furnace, which will be located in Zaragoza. Here again, project development is on track, and we plan to start at the end of 2024.

Jacutinga was launched at the end of the year, as was planned. It is a big success and I would like to congratulate the team, which have been working day and night to make sure it was at the rendezvous. This furnace is going to be focused on long run beer and spirit production which will build our capacity on Emerald Green bottles in Brazil. This furnace is with fully-loaded with some key customers and capacity has been allocated. You see the numbers. CAPEX for this furnace, the initial target was €60 million. We are just meeting this number, so very good

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Verallia FY 2022 Results

Thursday, 16th February 2023

project management, on time, and we are going to get this additional capacity of a little bit more than 100,000 tonnes per year. Again, congratulations to the team who have been able to make that real.

One other key topic we like to share with you, is a thing which is related to ESG. You know that we have put ESG at the core of the company, the core of our strategy. Our objective for 2030 has been validated by the SBTi. We are now part of the attack SBT 1.5 degree Index, which is an index which focus on climate. Then, we are quite proud of the latest ratings which have been upgraded to first platinum medal with Ecovadis, meaning that we are among the top 1% company among 90,000 companies, which is a nice award for Verallia.

CDP, we got an upgrade of our rating to A-minus. And MSCI as well, we got this upgraded to BBB.

ESG is, obviously, a result as well, and we are focusing on two key categories. The first one is fuel to emission. For 2022, Scope 1 and Scope 2 has been reduced by 2.7%, which is finally minus -10.8% compared to 2019.

We are totally on track with the roadmap we have defined, which will lead us to reduce by 46% in 2030.

Another key KPI is the usage of external cullet. We reach 55.7% in 2022, +0.7 points compared to 2021. Here, again, we are on track to meet our objective of 59% in 2025 and 66% in 2030.

Verallia is also about creativity, focusing on added-value products, meaning premium. Here, you have a clear demonstration of our activity. This is just a few examples that you see in each of our countries. We have some quite successful stories. For instance, take Spain, we have launched the lighter bottle we can find on colour, and we are able to reduce by 125 grams this bottle compared to a traditional one. Can speak as well about the successful story of the Prosecco Rose in partnership with Vera Wang. This is really something that we are aiming to keep on pushing because we are very convinced that it is additional services to our customers and this is something we want to be in.

One other key moment of 2020 was our acquisition of Allied Glass, that is now Verallia UK. We confirm in November the closing of this operation, and it is a key operation for us, a strategic operation for us. Firstly, being the first one for Verallia; and secondly, because it is totally aligned with our strategic view. Here, it means that we are now completing our geographical footprint being present in UK. Verallia UK is a leading company in premium glass. Obviously, we see a lot of upside. The integration is ongoing, going well, and obviously, we are starting to work on all the potential synergies and remaining in the way we want to do business, which means 'glogal', what I call glogal. It means that UK is in charge of the UK business. However, being global, Verallia UK will benefit from being integrated in Verallia from economy of scale, obviously, on purchasing side, but as well on R&D and technologies.

In a nutshell, our 2022 results are quite good, let's say very good, and I am very satisfied about what we have been able to deliver, thanks to the agility and determination of the team. For revenue, we have a revenue growth of +25.3%, so more than €3.35; adjusted EBITDA €866 million, so +27.6% compared to 2021; with a margin which is improving compared to 2021 at 25.8%. Net income reach a growth of +42.7% to €356 million. Net debt, we are continuing to deleverage the company. We are at 1.6x compared to 1.9x at the end of 2021.

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Verallia FY 2022 Results

Thursday, 16th February 2023

Extra-financial indicators, again, which are the core of our strategy, I have just commented it, so we are on track. The dividends, we are proposing a dividend per share of €1.40, which is +33% compared to 2021.

For now, I am letting the floor to Nathalie, who is going to present in detail our financial results.

Financial Results

Nathalie Delbreuve: Thank you, Patrice. Good morning and good afternoon to all of you. I am very pleased to comment these numbers for you again this month.

Consolidated revenue for Verallia, we ended the year 2022 at €3.352 billion. You can see on this page the usual bridge. We were at €2.674 billion in 2021, that means an organic growth of 26.5% versus 2022, and 32.9% in Q4. You can see in the bridge that the volume impact is limited. We explained already that we would have reduced capacity in the second half of the year with the timing of our furnace renovation, so this is perfectly in line with our expectation.

Now, the price and mix pillar is the most contributive one. In Europe, we have run several selling-price increases during the year of 2022 to compensate for the sharp inflation in production cost, and in Latin America, we do that as usual with a dynamic selling price variation. Important to note that the mix contribution has been positive throughout the year and on the quarters.

If we move by product category, the volumes have been pretty especially strong in spirits and also in sparkling wine with a continued recovery in Champagne reaching new records, and in sparkling wine in absolute. We have solid volumes in food jars as well.

Now, you see that the FX pillar is negative, this is mainly due to Argentinian peso, and to a lesser extent to Ukrainian hryvnia.

We are very pleased to introduce a perimeter impact. Now, the €17.5 million that you see in this bridge is the consolidation of Allied Glass in UK. This is a bit more than one month activity only, so in the 2022 figures, Allied contribution is very limited still. It will be of course effective in 2023.

If we move by region, in South and West Europe the revenue evolution has been 22.1% reported. We have flagged reviews, despite the four furnaces renovations in H2, and we have seen here very strong, the spirits and the sparkling wine that I just mentioned, and a very positive mix, especially in Italy.

If we move now to North and Eastern Europe, important to note that UK is included in this region, in this segment of North and Eastern Europe, and it contributes 3.2% in the growth, that is 29.3% as you can see. We have a slight increase in volume, and it is important to mention that it is despite the volume drop in Ukraine. You know that in Ukraine, the situation for Verallia is unchanged since we have our last call together. We continue with one of the two furnaces running, and I have to say here that our team in Ukraine is very strong, very committed and doing an outstanding job throughout the year in 2022, and supportive, of course, to our customers.

In North and Eastern Europe, also, strong in spirits, but also in wine, and we have seen growth in beer and food jars.

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Verallia FY 2022 Results

Thursday, 16th February 2023

If we go to Latin America, you will see that figures for Latin America are again very, very strong. We have +38% of reported revenue, and it is +50% at constant exchange rates. The sales volume continue to be really strong in all the segments, I have to say, especially beer, spirits and sparkling wine, and we have seen significant increase in selling prices to follow the inflation. You know that in Latin America our spread is positive in each and every country, which is again, a very strong achievement of our team there.

We have successfully launched the new furnace in Jacutinga, as Patrice said, exactly on time. The contribution to the books is still, of course, very, very limited. Now you remember, it really started to have good glass in December, but exactly on time. Again, this will be a contribution to 2023.

If I move now to the consolidated adjusted EBITDA bridge, the usual format. We had an adjusted EBITDA of €678 million in 2021, and we achieved €866 million in 2022. In terms of margin, you have then on the right top corner, we moved from 25.4% to 25.8%, which is a strong achievement as we succeeded in compensating for the dilution of the price increases. You can see that our three pillars contributed positively to this performance.

The first one is the activity and operating leverage. Here, we had overall flat volume throughout the year and the positive impact is mainly coming from stock variation and valuation. The second pillar, the spread is the most contributive, as you can see. Progressively throughout the year, and we commented that to you each quarter, we have been able to offset the cost inflation in all the geographies. We have also, a positive mix contribution throughout the year in each of the quarters. One important point is about Q4. We have especially strong spread in Q4, but remember that a comparison basis here is important. In Q4 2021, we had a negative spread as we had started to see a strong inflation in energy costs and customer prices were not yet adjusted, so we have a comparison effect here.

If we look at the next part, we are pleased to report that we succeeded to deliver 2.1% of cash production cost reduction. You know that our target is to deliver at least 2%, and we had a strong Q4 here, so very good performance throughout the Group.

The exchange rate effect is negative and this is mainly due to Argentina. In the EBITDA margin, important to insist that there is a country mix effect, and regional mix effect, I should say, as LATAM performance is strongly contributing.

I will show you now the regions. EBITDA in South and West Europe moved up from €453 million up to €555 million, that is +22.5%. In terms of margin, you can see that we are pretty stable, even a bit above 24.8%, to be compared to 24.7%. Here, we have a positive inflation spread. As I commented, the product mix was strong and the industrial performance was good as well.

If we move to North and Eastern Europe, here UK is included but has really no impact in 2022. As I commented, remember the acquisition was on 8 November. The EBIT moved from €117 million up to €147 million, that is +25.1%, and the adjusted EBITDA margin 21.1%, that was 21.8% one year ago. The positive inflation spread on sales is due to the rise in cost. Here as well, we have industrial performance in line. Important to mention that in EMEA, we have Ukraine and this is impacting the comparison versus last year, but our Ukraine team succeeded in delivering a positive EBITDA throughout the year, so a really strong performance.

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