Verallia : Transcript de la présentation des résultats du premier semestre 2021

Verallia H1 2021

Results

Thursday, 29th July 2021

Transcript produced by Global Lingo

London - 020 7870 7100

www.global-lingo.com

Verallia H1 2021 Results

Thursday, 29th July 2021

Introduction

Michel Giannuzzi

Chairman & CEO, Verallia

Welcome

Thank you very much, and good morning, everyone. Thank you very much for attending this call. I hope you and your relatives are in good health and not suffering too much from the COVID. We will go together, with Nathalie, through the H1 results, and we will start first of all by reminding everyone about the company profile.

Company Profile

As you know, Verallia is the leader in Europe in glass packaging industry. And Europe, which is for us the Great Europe, encompassing EU plus Ukraine and Russia, represented last year 90% of Verallia sales. We are number two in Latin America, where we are present in three countries: Brazil, Chile and Argentina. And in last year, Latin America represented 10% of our sales. And we are the third largest company in the glass packaging industry.

As you can see on the left-hand side, we have a very diversified end-market reach, where we can address all the segments of the market with a strong presence in the wine segment based on our historical presence in the three largest wine-producing countries in the world, namely, Italy, France and Spain. And we address more or less in a balanced way all the other segments of the market.

Now, Verallia is made of 32 glass-producing plants with in total 58 furnaces to produce glass packaging. We also have three decoration plants that provide additional services to our customers. We are also treating about half of the cullet. Cullet is the name of the used glass that we use internally. And therefore, we have nine factories that are working through really for us in order to treat the cullet that we reintroduce in our furnaces to make glass again.

And in total, we employ around 10,000 employees in 11 different countries and we make every year about 16 billion bottles and jars.

Financial Highlights

So moving to the financial highlights of the semester. First of all, I think it is interesting to note that the capital structure has evolved quite a lot since December. As you noticed, there has been two blocks of shares traded on the market based on the sell-down of Apollo, which today means that Apollo owns 16.3% of the capital of the company. At the same time, we have seen our Brazilian investor, BWSA, increasing their shares progressively and slightly up to 26.6% at the end of the semester.

And the most important highlight of the semester was the fact that, as we mentioned before, we have bought back some shares two times during the semester. In total, we bought back some €109 million worth of shares. 1.6 million of the shares that we bought back have been cancelled in order to avoid any dilutive effect due to the employee ownership programme that we implemented last year and this year. And we have kept 1.7% of the treasury shares in the balance sheet. So today, the Verallia share capital is divided into 122,289,183 ordinary shares.

The other important financial event of the semester was the launch of the inaugural Sustainability-Linked bond. This was the first issuance of a bond by Verallia since we are listed

www.global-lingo.com

2

Verallia H1 2021 Results

Thursday, 29th July 2021

as a listed company. It was clearly oversubscribed. We had four times more request than the €500 million that is finally committed to issue.

We were the first issuer of a Sustainability-Linked bond in Europe in the glass packaging industry. And we benefitted from a very attractive financing conditions with a coupon of 1.625% per annum. And this has provided us not only a diversification of our fund of financing, but also it has provided us a greater and extended maturity because it is a seven-year bond that we have raised in May.

So I think we have been very much supported and we received a lot of interest from the bond investors on the two KPIs that are ESG-related that we have taken to merger the sustainability approach of Verallia. One of them is the reduction of the CO2 emissions, which is in line with the presentation we made in January regarding our long-term commitment to reach the 27.5% CO2 emissions reduction by 2030 in line with the COP21 agreement. And therefore, for this specific bond, the objective is to reduce by 15% against 2019 our CO2 emissions by 2025.

The second KPI that we took was to increase the external cullet usage rate and to increase it by 10 points versus 2019, again, reaching 59% by 2025.

Now, this has been considered by Vigeo Eiris, which is the independent or second party opinion that looked at this bond as very relevant and as a high ambition, which allowed Verallia to reach the highest rating provided by Vigeo during this issuance. So the team here is very proud about what has been achieved and it is again a strong commitment not only on the financial benefit of its bond but also of the commitment of the company in its move and ambition to reduce CO2 emissions.

Verallia Design awards

Moving to another competitive topic, one of the very strong capabilities of Verallia is design. And just as for information, since 2009 we are organising in main Verallia countries some design contests with students. This year we had more than 500 students in France, Italy, Spain and Ukraine. And we provided the theme of the year. We showed the theme was Glass in Solo Format. And based on this theme, we received a lot of interesting design ideas and design products. That sometimes end up in a commercialisation because they are very much liked by some of our customers.

And we have had a very interesting successes in the past with this contest being most interesting products and have been selected by our customers to be commercialised.

Every year, we also have on the design side, what we call, a style book, which is trying to anticipate the trends for the following year. This is our premium product line which we call selective line, that is benefiting of this trend book. And this, again, has been updated and put online on our website very recently. And you can see all the beautiful products that we can provide to the customers as well as the new trends for the next year. So this is all for the design.

ESG Initiatives

Let us move again to environment, where Verallia has joined the Ambition for Climate initiatives launched by AFEP. AFEP is a French Association of Private Enterprises. The idea is to really put together all the good examples of what companies in France are doing to reduce the global

www.global-lingo.com

3

Verallia H1 2021 Results

Thursday, 29th July 2021

warming at the global level. And we have submitted three low-carbon projects on the platform, the Ambition for Climate platform.

One of them is about the improvement on non-melting energy. The second one is about the ability to de-mix white cullet in order to improve the share of white cullet in the flint glass production. And the third project is about the project that is ongoing with the installation of photovoltaic panels on our Portugal site of Mondego. So these were, again, some good examples of what Verallia is doing to reduce its CO2 emissions.

And last but not least, on the social and community side, we have, as we speak, partnered with Bpifrance on their Big Tour. This is a second year in a row that we participate to this Big Tour. The purpose of this is really to get consumers, citizens, know more about the glass industry, about Verallia and also promote, of course, the recycling habit at a very large scale. So this Big Tour is organised in 24 different cities from 16th July to 20th August by Bpifrance.

We also promote, during this tour, the know-how and innovation and the French industry and technology. And we have a stand there where we meet hundreds and thousands of visitors where we educate them about the quality of glass and the importance of recycling. So the goal is really to raise the awareness and to involve all communities in the challenges of the circular economy.

And last but not least, we have a few jobs to propose to those people that would be interesting to join us in our industry.

Financial Results

Now these are the most interesting highlights of the semester. Now let us move to the financial results. As you have seen from the numbers, this is a very robust performance in the first semester with a very, very strong Q2, where you can see that the revenues were up 4.2% for the semester and it was even a 7.7% organic growth for the semester. But Q2 shows a very strong after Q1, as you remember because of it is soft, we mentioned a soft start for the year, Q2 was extremely strong with 14.8% growth in Q2 and a 17.6% organic growth in Q2.

So this is, as we said before, the results of the progressive reopening of hotels, café and restaurant mainly. And by the way, we are clearly sold out and our factories are producing as much as they can and everything we can produce is today being sold, given the strong demand that we have on the market.

Now on the profitability side, our EBITDA increased also very significantly, +15.4% compared to H1 last year and 20.8% organically to reach €345 million, which means an EBITDA margin of 26% compared to 23.4% last year, again, very, very nice results that we are very proud to comment to you today.

As a consequence, indeed, the net income has jumped significantly from €79 million last year to €133 million. And it is even €155 million if we exclude the PPA impact due to the acquisition of the company from Saint-Gobain, which is amortisation basically of the customer relationships that was booked at the time of the acquisition. And despite the strong share buybacks that we made during the semester, the very strong cash flow allowed us to keep reducing the leverage of the company and we ended up the semester with a leverage of 1.9 time adjusted EBITDA for the last 12 months against 2.1 at the end of March this year.

www.global-lingo.com

4

Verallia H1 2021 Results

Thursday, 29th July 2021

So altogether these very strong results give us the confidence that we can improve our guidance for the year. And we are going to revise the 2021 adjusted EBITDA upwards, so that we will comment it in a few minutes.

Before we move to the guidance upgrade, which I am sure you look forward hearing from us, I will hand over to Nathalie, who is going to explain to you the strong results of the semester.

Financial Overview

Nathalie Delbreuve

CFO, Verallia

Introduction

Thank you very much, Michel, and good morning to all of you. So indeed, let us go and look at the sales at the top line. What you can see that we enjoy a strong organic growth in the first half with plus 7.7%.

Now, as Michel commented, that we had a slow start in Q1 in the year in terms of volumes, we had a negative organic growth in the first quarter, but the second quarter is showing plus 17.6% so a strong rebound and directly linked to the gradual reopening of the on-trade channel.

So the sales have been strong on all product categories, exception for food jars. That is a category that benefited last year from the first lockdowns in the second quarter. So food jar volumes are more back to pre-COVID and 2019 levels in our portfolio.

Now the spirits rebounded sharply and thanks to exports to Asia and US pick-up in the second quarter. The sales price increases as already commented are pretty moderate. And this is exactly as planned. And one important point in the first half and even stronger in the second quarter is that we enjoyed an excellent product mix at Group level.

And now the last pillar is impact from exchange rates, that is negative for us, mainly from Latin America.

Southern and Western Europe

If we look now at our regions and move to Southern and Western Europe. You can see that the sales recovered well and organic growth is positive at plus 5.5%. So the growth is in all the countries and all the product categories with the comments I already made on food jars.

In Southern and Western Europe we can really see the spirits back and quite strong in the first semester. The growth is also there in wine and beer, and sparkling wines benefited from Italy increase and especially on Prosecco. And in Southern and Western Europe price contribution is pretty neutral.

Northern and Eastern Europe

Moving to Northern and Eastern Europe. Here, you can see negative organic growth. So some comments here. We mainly had a fall in volume in Q1, so the impact is mainly in the first quarter. And we have seen an improvement in the second quarter with volume improving across all product categories. And to recall that one year ago, Northern and Eastern Europe

www.global-lingo.com

5