Hello, and welcome to Verallia acquisition of Allied Glass. My name is Sarah, and I will be your coordinator for today's event. Please note this conference 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 questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Patrice Lucas, CEO of Verallia, to begin today's conference. Thank you. Good morning, everyone. I hope that you are all fine, and I would like to thank you for being with us right now, despite the short notice, for this call. I am pleased to announce that Verallia is making its first acquisition, and we have decided to acquire Allied Glass in the U.K. My objective today is to share with you some piece of information about this acquisition and then go as usual through a Q&A session. To start with, Allied is a strong industrial leader in the premium glass segment. Allied is all about leading in this growing U.K. premium market with a long-standing U.K. market presence, about 150-year, with a clear focus on premium segment, with advanced design, manufacturing and decoration capabilities. Clear focus and primary focus on fast-growing premium spirits, notably gin and whiskey. They are operating with four furnaces located in Yorkshire. Verallia, Allied is as well diversified customer base with a high-end service. Diversified customer base covering blue chip, traditional and emerging brands with a good pipe of new product development, with a highly flexible operation setup to meet bespoke needs, and with high customer relationship, long-lasting customer relationship. Allied is a strong team and has a strong track record, so it is around 600 employees with more than 12 years seniority. A strong management team, and I want to insist on that, with significant industry experience. It's a highly profitable platform with industry-leading margins and a strong growth track record for the past years. With a clear sustainability focus, with a clear action plan and targets in place for the future. It is a standalone platform with a factory optimization program well underway. The rationale of the transaction for Verallia, it is to strengthen our premium positioning while gaining exposure to a growing U.K. spirit market. It is to capitalize on a unique positioning and expertise in luxury glass containers. It is to complement, obviously, Verallia geographic footprint, while gaining exposure to this fast-growing spirit market. It is to broaden our customer base towards resilient and loyal gin and whiskey customers and pursue some cross-selling opportunities. It is to expand extra wide color decoration and other premium capabilities. It is as well an opportunity to leverage some common ESG commitments, priorities and best practices. It's going to enhance Verallia average price and EBITDA margin. Obviously, moving forward, we'll have this opportunity to exploit further synergies by developing a sales team, optimizing SG&A, procurement and deployment of so-called Verallia PAP methodology, which I'm sure is going to bring some improvement in the operation for additional profitability. As far as the financial terms, Verallia is acquiring 100% stake for an enterprise value of GBP 315 million. It is fully financed by existing cash. Our leverage will be maintained below two. We do plan to keep on adding our same shareholder return policy with a dividend, and we expect to close in the days to come, let's say mid-November. In a nutshell, this acquisition is really fully aligned with our strategy. It is, as we have shared several times, totally part of our capital allocation. This acquisition is going to preserve our strong financial profile. Again, with a good contribution to the Verallia margin. To be clear, we have a standalone business here, which is having before synergy and higher profitability than the group average. We see some significant synergy potential, again, with our PAP methodology, for sure, which will bring a continuous improvement over time. As it is a standalone asset, we are going to enjoy strong growth potential. Again, we maintain our leverage below two. For shareholder return policy, no change to what we already communicated, meaning that we are going to have a dividend, keep on growing at above 10% per annum, and we keep with accretive share buybacks, options. This is what I wanted to share at glance with you, and now I'm open with Nathalie to answer your questions. As a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. On the line to answer your questions, we have Patrice Lucas, CEO of Verallia, and Nathalie Delbreuve, CFO of Verallia. Please ensure your lines are unmuted locally as you will be advised when to ask your question. The first question comes from the line of Matthias Pfeifenberger from Deutsche Bank. Please go ahead. Yes. Good morning, Nathalie and Patrice. Thanks for taking my questions and congrats on the deal. Just checking a couple of pointers here. Firstly, what has been the growth in the U.K.? You said it's a high growth opportunity. Isn't alcoholic beverage penetration quite high? What has been the growth and what's the competitive landscape? That's the first one. Second one, what are the margins? Can you quantify? Lastly, including any purchase price allocation, what would you expect the EPS accretion is in 2023? Thanks a lot. Thanks a lot, Matthias, for your question. About growth, you know that in our market average growth in Europe is about 2%. What we see here with the specific market and segments that Allied is targeting, and it has been demonstrated for the past years, is that we're gonna see an average growth or growth which is gonna be significantly above the market average. Again, 2%, what we see is between 5% and 7% on this premium market. As far as competitive landscape, you know, the number one is Ardagh Glass in U.K. We have a number two, which is O-I. Then we have Encirc, and then we have Allied number four, but with competitive competitors which are not playing exactly on the same market. If you take the U.K. market, we could say that Allied is about 10% of the installed capacity. But with the markets we are targeting, which is high premium market, we are about, let's say, 30% of what the U.K. market is addressing for spirits and gins. Yeah. Hello, Matthias. Nathalie speaking. Hi. As for your questions on the margins and the EPS, the margin of Allied is currently above our group's average. I won't give you more details. It's slightly above, which is very good news. On top, as Patrice said, we anticipate synergies by applying I mean, first, by Allied joining a larger group, so synergies on purchasing, also benefiting from the sales side also to the portfolio of Verallia, and by rolling out our PAP program. That's why all in all, this acquisition is accretive for us. As for the EPS impact, it's early to say just so it will be accretive, it will be positive. I mean, reminding the size of this acquisition, which is, of course, goes on to the group. Yeah. Okay. Just a small add-on. It's more than 95% U.K. revenues, and that's not including any exports, so there's limited export business, right? Yeah. Absolutely. Yeah. Correct. Yeah. This is why. Okay. For us this is total new territory, I would say. Yeah. Thanks a lot for the clarity, and congrats again. Thanks a lot, Matthias. Thank you. The next question comes from the line of Lars Kjellberg from Credit Suisse. Please go ahead. Yeah. Thank you. Just a couple of follow-ups on Matthias' questions. There's a huge amount of volatility in the margins now. Can you give us a sense of what the premium margin has been over time versus Verallia's margins? Also when it comes to the synergies, you're essentially adding a new market. Is there any meaningful operational synergies, or is this more to your points, adding your PAP methodology and maybe some procurement? But also if you can give a scale, how we should think about that opportunity when it comes to synergies. The final point you obviously haven't shared what you're paying for this thing in terms of EBITDA multiple. Can you give us any indication how you think about the synergies, post-synergy multiple versus whatever you're paying today? Thanks a lot, Lars. First of all, sorry, about premium margin, so again, we are not going to communicate about that. What the beauty of Allied and what they have been demonstrating and doing for the past years is that they have been able to grow, they have been able to be highly profitable. Again, the margin is gonna be above group average. All of that before synergies. About synergies, what I would like to mention is that I think again, this is since day one when we started to discuss for this acquisition, we see a strong alignment in terms of value, in terms of doing business, way of doing business. With the key pillars we are using within Verallia to develop our profitability, let's say. We foresee with PAP especially some industrial upside. A new team who is going to be willing to implement these methodologies. On other topics, I'm sure that we will be able to take the best of both and get some nice contribution as well with some sales development. You can imagine on top of that, for Allied joining a bigger group, an international group as Verallia, it is an opportunity as well for synergies in terms of CapEx, in terms of purchasing. Again, this is something we are going to build as a team for the next weeks to come, especially addressing 2023 view of the business, 2023 budget. For the multiple, we are not communicating on that. Let's say that we are paying what we do consider as an average in this market. Much more of what is important for me, I'm not looking at the short term, we are all looking at the long term when considering what we have in front of us. We do believe it is a very good and strategic deal for Verallia. Just two very quick follow-ups if I may. First one being, did I understand this correctly that you said you're gonna close within weeks? The second point, again, if you can confirm this has come from cash at hand, so there's no incremental borrowings on your side. Yes, we are planning to close mid-November, so in few days from now. For the cash, Nathalie? Yes, we will pay with cash at hand. You remember we enjoy a high liquidity at the end of September. We communicated that we had EUR 1.2 billion liquidity. This allows us to pay with the cash available and not to go into additional loan. Very good. Thank you. The next question comes from the line of Francisco Ruiz from BNP Paribas Exane. Please go ahead. Hello. Good morning. Sorry to insist on the margin side. When you say that they are above companies or group margin, are we talking about this 26% that you posted in nine months? I do have also a couple of more questions. Looking at the evolution of sales compared 2021 to estimated 2022, it looks relatively low, taking into account how much the prices have increased this year. I mean, am I missing something? Because theoretically the sales has grown only 10% year-over-year, so when prices has been growing more than this. Last question is if you could give us an idea of what's the level of capacity utilization in order to grow this 5% per annum, and also the age of the furnaces, if you need to make a big refurbishing in the short term? Thank you. On the EBITDA margin, hello, Paco. You are right, yes. We refer to the 26% of Verallia Group at the end of September. It's above that. For the growth you are referring to, we see rather a growth around 15% year-over-year. We need to take into account as well that in 2022, there was a significant event with a new furnace rebuilt in Leeds. Obviously which has had an adverse impact the production availability to push. But we see a growth down the road, and again, with some assets, this is one observation which has been. We have four furnaces. One which has been fully rebuilt in 2022 through the summer, and production has restarted at the end of August. The other furnace in Leeds will have to be rebuilt in 2023. The two other furnaces are not before 2027-2028. I must say that we have seen some significant investment in the past years within Allied, which is a good point. We see that as a positive asset. In terms of capacity utilization, what's the you know, capacity you have right now? You can imagine that we are going to look to use full capacity. As you know, the topic between the demand in Europe versus the installed capacity. Our objective is gonna need to work with Allied to make sure that we are using full capacity, take some opportunities for business development. Again, through the PAP methodology, for sure, working on some line efficiencies. Again, being humble and working with the teams, we believe that we're gonna find ways here to fully use this capacity and even to increase it step by step. The next question comes from the line of Michelle Prupes from Jefferies. Please go ahead. Good morning. Congratulations on the deal, Patrice and Nathalie. Just one question from me. I understand that this acquisition allow you to further leverage premiumization trends that are expected to bring benefits over the cycle. I also understand that like short term, the weaker euro and pound are boosting exports. Looking over it, are you concerned that our recessionary period may reverse this considering final consumers that might down trade or budget their expenses? Thank you. Thanks a lot, Michelle, for your comment and for your question. Again, the question of short-term versus long-term for us is not a topic because we want to be long-term oriented. Whatever is the current situation, we'll have to face it. Again, we do not see any recession at the door in what we see from our customers. Being much more specific with Allied, when we see the segment where they are playing, we see, so we do not see any issue. Premium is certainly the segment which is going to be very resilient. Most of the customers, Allied is delivering or exporting quite a lot, which is as well with the current Forex is an opportunity for our customers. We do not see that as a real topic and being a long-term oriented. Again, this does fit totally. Are you sure? Hello, do you hear us? Yes, but the sound doesn't come from me. I hear like the background noise. Thank you anyways for your answer. How are you? Sorry for that, Michelle. Maybe you cannot. No, that's fine. No, No, I got the answer fully, completely. Thank you. Okay. Thanks a lot. Can we speak again? Apologies, I'm trying to solve the issue. Okay. Hello? Okay, please proceed. Apologies for the system error. Do we have another question? Yes. The next question comes from the line of Jean-François Granjon from ODDO BHF. Please go ahead. Yes, thank you. Good morning. Could you just come back on the market share? I don't quite understand when do you mention about your, the market share you have, on the U.K. today. The second question, could you more quantify the synergy expected, with, after this acquisition? My third question, when do you will integrate and consolidate the acquisition, at the beginning of 2023? The last question, this is the fourth acquisition you made in the U.K. What do you expect for the future? Do you expect another operation to increase your market share? What is your strategy to well penetrate this new market? Thank you. Thanks a lot, Jean-François. First of all, about market share, what I was mentioning was just an indication, because you know that we are not used to speak about market share. I was just giving an indication of what was Allied about. Allied is about 10% of installed capacity in U.K. If I'm looking just about the market they are addressing, it is much more around 30%. Because again, they are targeting a high premium market. This is what is representing about the synergies we are expecting, I mean, again, you know our strategy about PAP, for instance, that we are going to look for 2% PAP at group level. This is something for which Allied is going to contribute, obviously. I cannot say more than that at this stage. This will be briefed with concrete actions with the Allied teams line by line. We have purchasing, we can imagine that we'll have some nice purchasing synergy when it comes to buying soda ash, for instance, or others. On CapEx as well, with maintenance to come and the rebuild to come in 2023 for one of the furnaces in Leeds. First acquisition, yes, it is our first acquisition, and this is why I believe it is a strategic move for Verallia. As we have said, we are going to keep on monitoring and screening what opportunities we could have on the market. Here, this one was a new territory for us. We with a key player on the specific segment, again, contributing to good margins and good contributions to the group. Other could be consolidation on some actors in Europe or others. Again, we are fully open. No clear details at this stage. If opportunities we will seize them, and we have one criteria, and you know it, is that it has to make sense for value creation, and it has to make sense for stakeholders. This is what we will look about. About the consolidation date, Nathalie, yes, we're gonna start to consolidate. Yes. In fact, the consolidation date would be the closing date. Where you're right is that, if we are talking about mid-November, we will see a very limited impact in the P&L of Verallia for the year 2022. The full year will be 2023. The consolidation date will be the closing date. Okay. Thank you very much. The next question comes from the line of Morris Guillion from Societe Generale. Please go ahead. Hello, Nathalie, hello, Patrice. Thanks for taking my two questions. First one is on inflation pass-through. Should we look for a similar energy hedging policy at Allied in 2023 than for the other European regions? Second one is on the financial situation of Allied. Could you let us know what is the leverage level or balance sheet position of Allied with respect to Verallia? Thank you. Thanks, Guillon. On your first question about energy hedging, we have. Allied today is having a policy which is very similar to what we have at Verallia. In a nutshell, we can say that they are very well protected for 2023. About the leverage, Nathalie, if you want to. Yeah. As we communicated, anyway, we will integrate Allied in our financing. After the acquisition, our leverage would remain below 2x. This integrates everything, the acquisition and the financial position of Allied. Thank you. The next question comes from the line of Fraser Donlon from Berenberg. Please go ahead. Yeah. Hi, Patrice and Nathalie. Thanks for the presentation. I have a few questions, so I can maybe just go one by one, just to make it easy for you. The first was just, you mentioned this 30% market share of, let's say, the premium segment in the U.K. I'd be interested kind of on your thoughts on who is filling the rest of that, because obviously like Encirc and some of the others are kind of quite standard, I think, in their product range. So, is it kind of that O-I and Ardagh have some premium share as well, or is it actually like imports from, I don't know, Saint-Gobain in, sorry, exports out of France, with Saint-Gobain, for example, you know, on the premium glass? Just to kind of have some color there would be useful. Well, we are not used to speak about market share. My indication was much more about the order of magnitude of on which market Allied was playing. I do not want to comment any additional topic on that, mainly about competition. Here we have a key strategic acquisition for us, which again playing on a nice profitable and potential growing market, and this is what we are going to focus on. Okay. Very clear. I guess again, without knowing exactly like the selling price and like the economics of these particular glass containers, but like could this kind of become like a European platform for Verallia in premium glass, i.e. you could kind of like reach markets outside of the U.K. and like increase the export sales within Allied or that's not really on the agenda, it's just to serve the U.K.? This is something we could think about. There is no definitive stance on that. We're gonna see how we can have some. Again, this is gonna be part of some potential synergies and opportunities that we are going to build as a unique family now. They are already quite a lot on the table with the U.K. market. Again, this is something we're gonna work on. Okay. Understood. Just thinking about the kind of P&L of Allied, should we think of D&A over sales as similar to Verallia or is it a little bit higher? You know, is it kind of like 10% or something like this, or? Sorry, say that again? Just to understand the kind of capital intensity of Allied Glass. Should we think of depreciation and amortization as a percentage of sales kind of around the 9%-10% range, which is kind of usual, or is it a little bit higher because they're more kind of flexible in their production and stuff? Yeah. No, it's not higher. It's Okay. It's very similar to ours. Okay, perfect. Helpful. Thank you. Again, without, like, I guess, talking about the PAP, is their production tool very different than kind of the usual production tool of Verallia, let's say? i.e., you know, is it more difficult to implement the Performance Action Plan within these kind of more flexible furnaces and flexible production footprint or is it actually quite similar to what you have already in terms of the way they operate? I would say that it is quite similar. Obviously the industrial means are fully adapted to the market they are addressing. The PAP methodology is all about making clear identification of what are the loss of efficiency, where we do have opportunity for improvement. The global methodology is about the same. It means that it's easier, again, to identify from upstreams to downstreams on your line what are the inefficiencies, and then to be creative with the teams implementing some action plans, which at the end of the day are leading to additional output. Methodology is about the same. The process is a little bit different, again. Okay. A little bit much more adapted to a smaller batch. PAP will be totally adapted to implement synergies. Okay. Thank you. Just in terms of like I think this asset's kind of changed owner a few times in the past, and I was just curious, like how did it arrive? Did you kind of source it yourselves, the acquisition? Sorry, say that again? I was just gonna say, I think Allied was acquired in 2020. I was just curious as to how the deal came to Verallia, whether it was kind of something you sourced yourselves. In fact, it was signed the acquisition in 2019. Okay. In 2019. I mean, all this is all about the screening we are making to try to implement some M&A operations. It starts as usual with management discussion and to see if there is a fit, if there is a willingness or an alignment to move further to an operation. Okay. Perfect. Okay. That's great. Well, congratulations for the acquisition and thanks for answering all our questions. Thanks a lot. As a reminder, if you would like to ask a question, please press star one. The next question comes from the line of Matthias Pfeifenberger from Deutsche Bank. Please go ahead. Yes, just quickly, again, slightly off topic, but do you wanna comment on current trading? We saw O-I yesterday. How the price negotiations going for 2023? Also I came across a post of FEVE, the glass association, and I start to read about the Verallia R&D project. It seems like following the dismissal of the initial group because of limited EU funding, there is another initiative with ENGIE and Saverglass and others. Are you not joining this group again in terms of hybrid or even electric furnace development? Thanks. Thanks, Matthias. Well, I mean, I do not want to comment again on competition and others on that. What I know is that we have defined our own technological bricks. As you know, as commented a few weeks ago, on our hybrid furnace, we are moving forward, and we plan to be ready for production at the end of 2024, and we have decided to look at in Zaragoza, in our Zaragoza factory. On the current trading? No. No. Okay. Thanks, thanks a lot. Too much, yes. We currently have no further questions on the telephone line, so we'll switch over to written questions just now. I'll pass the word back to you, host. Do we have some online questions or no? I'm just looking at them. Most of the questions have been already answered. I'm just sorry, discovering them. About the U.K. potential, the U.K. market. Maybe just there was a question regarding, so please could ask about volume growth in the U.K. market. It appears that total whiskey volumes for the market have not grown much over time, which verticals have been most important from volume growth over time? Where did come the growth over the past few years, if it was not from whiskey? We make the detailed analysis on the premium part of it, we see the growth. We see some growth, both in whiskey, in gin, and other spirits. Okay. No, there was another question regarding maybe the opportunities in U.K. following this deal, likely to be more organic or inorganic development in the U.K. We are going to be focused with organic growth in U.K. now that we have this new platform, and this is something we are going to build with the teams there. With the industrial improvement, we can plan for the future, yeah. This is where we are going to put our focus for U.K. market. Okay. Thank you. The rest were already answered regarding the synergies, the volume growth and transaction. Okay. If we do not have any additional questions, thanks a lot for your time. Sorry for the technical issue we had during the call. Again, it is our pleasure to make this announcement, which is fulfilling our strategy, our strategic plan. Let's move forward, and I'm sure it's gonna be a successful story. The integration is on our side now. Thanks a lot. Take care. Bye-bye. Thank you. Bye-bye. Thank you for joining today's call. You may now disconnect your lines.