Hello, and welcome to Verallia Quarter 3 2022 Financial Results Analyst Call. My name is Alicia, and I will be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. 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 Patrice Lucas, CEO, and Nathalie Delbreuve, CFO, to begin today's conference. Thank you. Good morning, everyone, and welcome to our Q3 conf call. As usual, it's always a pleasure for Nathalie and I to have the opportunity to make this call and to exchange with all you. To start with, as usual, want to share a few highlights. Sorry, I would like to remind what is Verallia about. So we are a global glass packaging leader. We are number one in Europe. We are number two in Latin America, and we are number three worldwide. We benefit from a diversified and balanced end market, which is a strong asset with our customer base, more than 10,000 customers. We do operate in 12 countries with 34 glass plants with 63 furnaces, and we have as well, to support our operation, five decoration plants and 12 cullet recycling centers. We do all of that with our 10,000 employees, producing more than 17 billion products. Before moving to our financial numbers, few highlights. First, about cullet. So you all know that cullet is a key resource. It is part of our ESG roadmap to increase period after period recycling and our cullet use in our furnaces. As Verallia, we accelerate our long-term investments across Europe, and here you have some examples of what we are doing. So first, in France, we have completed the upgrade of 2 treatment centers to maximize cullet separation. In Portugal, we are with our partner, Ambigroup, we are finalizing the construction of a new cullet treatment center, and this new entity, named Revimo, is starting to operate in October, and will support Verallia plant, with an additional capacity of treatment of 70,000 tons. In Spain, we have completed the acquisition of a treatment center close to Seville. This new entity, named Infiniver, with a capacity of 60,000 tons per year, will supply in priority Verallia Portugal plant, and other, if needed. And last, in Germany, Verallia and our partner, Remondis, will finalize the renovation of the treatment center in Bad Salzungen, and this will allow to achieve a state-of-the-art treatment efficiency, and as a result, increase the cullet output and cullet availability to our facilities. About decarbonization. Just to tell you that we are moving forward. We are on track with our roadmap. You remember our two new technology for the future, the electrical furnace in Cognac and the hybrid furnace in Zaragoza. Electrical furnace in Cognac will start at the end of Q1 next year, and the hybrid furnace will start at the end of 2024. And I'm pleased to announce today, that we are going to build our second hybrid furnace in France, in Saint-Romain-le-Puy. This furnace should go in production early 2026. It will be dedicated to color glass, and it will replace the current end-of-life furnace, the current traditional furnace, when it will reach its end of life. If you remember what we have already shared, this is totally aligned with our strategy. It means when our traditional furnace will come to the end of life, we will replace them with our new technologies, contributing to our CO2 emission reduction. Another important topic for us is to keep on being and moving at the forefront of the innovation. Here, I'm pleased as well to announce that we are launching a new Bordelaise Air bottle with lightweight 300-gram. So this is, for us, the reinvention of a classic Bordelaise, lighter and more aesthetic. It is obviously, as a consequence, less weight, less CO2 emissions, and it is really to go along, to accompany our customer journeys to our decarbonization. This will be available at the end of 2023. It will be available in many other countries, and we'll start production and delivering some customer in France, from France, Germany, in Spain, and even in Chile, in Latin America. So this is a clear and obvious answer, again, to lower CO2 emission and for our competitiveness. Now moving to our financial number. So thanks to good financial numbers in Q3, despite market volume slowing down during the summer, we are delivering a good and robust Q3 numbers, leading to very good nine months results. And here you have the main numbers. So revenues, we are at +22.1% just last year, representing a 22.5% organic growth. Our adjusted EBITDA is at EUR 950 million, so an increase of 39.9% compared to last year, with a margin closing at 29.8% compared to 26% last year. And we keep on delivering a good leverage. Our leverage is now at 1.2 versus 1.3 at the end of June, and compared to 1.1 at the end of September 2022. I let the floor to Nathalie, who is going to present in details our financial numbers. Thank you very much, Patrice, and good morning to all of you. So let's move to the key figures. So as usual, you see our bridge for consolidated revenue. So our total reported revenue moved from EUR 2,518 million to EUR 3,075 million, and that is an organic growth of 22 + 5%, as Patrice just said. In the bridge, you can see that the volume pillar is negative, with -EUR 161 million. So, as explained, we have lower year-on-year volumes, with more difficult market than expected in Q3. And it really started in August, so we've seen a weaker August and September than expected. This is mainly due to slower consumption, we believe, and still de-stocking down the chain that takes longer than expected. In Europe, beer for us is still the segment that is most suffering. And on the contrary, we see a good resilience in sparkling non-alcoholic beverages and also food jars. In Latin America, we have volume up in Brazil. And for the other countries, I mean, Argentina is still affected by the political and macro environment. If we move to the price mix, you see it's very positive, EUR 728 million. So here we are really on the continuation of H1, with a carryover impact from last year's selling prices and disrupt selling prices, and with really specific and moderate price increase that we started a bit in Q2. We have still a good contribution, positive contribution from the mix. The exchange rate impact is negative, and this is mainly coming from Argentina. And you can see in the perimeter pillar, the effect of Allied Glass acquisitions, so the Allied UK that was acquired in November 2022. So as a conclusion, a strong organic growth and enjoying the additions of the new UK business. So how does this translate into adjusted EBITDA? So we see a very nice improvement in our adjusted EBITDA in euros. So moving from EUR 654 million last year to EUR 915 million. And you can see on the top right that the margin, the adjusted EBITDA margin, is significantly improved from 26% last year to 29.8% this year. Moving to the bridge. So the activity, as we saw, is contributing a slightly negative -EUR 39.2 million. So this is the effect of the lower volume that I just commented. The spread is significantly positive, contributing EUR 296.2 million. So it's a continuation of a positive spread, and also a positive spread in Q3. Again, the mix is positive, also on the EBITDA, so sustainably. The net productivity, you know, our performance action plan program continues to deliver steadily. So, we are again in the 2% reduction of cash production costs. That is our target, and a strong pillar of our EBITDA value addition. The exchange rates are negative, and this is mainly coming from the Argentine peso. And in the other pillar, that is positive by EUR 28.2 million, you have specific one-offs, like costs, and positive one-offs from last year that we don't have this year. But the main point is the Allied Glass EBITDA contribution... That is in line with our business plan before acquisition, and that is just to remind everyone that we have a pure accounting effect here, a negative one of EUR 4.6 billion, that is also included in this pillar, linked to IFRS 2 acquisition, for the acquisition. As a conclusion, a strong increase in the adjusted EBITDA, and also in the margin. When we look at the net debt and the leverage, the net debt reduced from EUR 1 billion, EUR 1.4 billion to EUR 1.3, EUR 1.43 billion at the end of June, to EUR 1.3 billion at the end of September. The leverage is also reducing at 1.2 times. And just to remind that we count investment rate both for standard and growth and newbies in H1. So, a strong cash generation and continuous deleveraging for these nine months. And here, a reminder of our financial structure and liquidity. So no specific change in the quarter. Just to remind that 89% of our total long-term debt is fixed either by being fixed, like bonds or being hedged. And the available liquidity we enjoy is comfortable at EUR 947 million at the end of September. Thanks, Nathalie. So a word about our outlook to close the year. So despite a more difficult market environment since August, and you have understood through slower consumption and the continuing transition, but thanks, with our strong fundamentals and agility, meaning positive spread, Allied contribution, and capacity adjustment, to the demand we see in Q4, to prepare 2024 for good economic and industrial conditions. We plan to close 2023 within the range of our last EBITDA guidance, meaning we plan to close above EUR 1.1 billion. So this is what I wanted to convey as an outlook for this year. So now it's time for Q&A, so please feel free to move your question to us. Thank you. 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. We are taking now the first question from Francisco Ruiz, from BNP Paribas. Your line is open now, thank you. Hello. Hello, good morning. I have three questions. The first one is on the FX, because, Nathalie, you mentioned that, the big impact on this FX headwind comes from Argentina, but remember, or remind us, Argentina is only 4% of the sales, so it looks quite strong impact in the Q1, isolated just for Argentina. And can you give us an idea of what do you expect for the Q4? Mm-hmm. The second question is on the sales guidance. Patrice, you have not mentioned your above 20% sales guidance for the year. Is it still valid, or we are gonna see- Mm. Lower top line growth? And last but not least, you have commented on some curtailment of production in order to allocate your supply to the current demand. Can you give us an idea of the size and the impact on profitability that this could have? Thank you. Thank you, Francisco, for your questions. So, I start with Argentina. So you're right, Argentina is not a large part of the group, so you're right about your comment. Now, there is a specific political situation in Argentina, meaning we are in the middle of the elections. So it started in August and will end in December. So what oe've seen is already a kind of devaluation of the Argentine peso. In August it was around 20%. So even if the size of the country is limited for Verallia, that's why we see this significant impact, FX impact. In our year-end guidance, the outlook, yes, we do include an additional negative for activity covered in our outlook, as the end of the elections are not yet. Okay. So, Francisco, about our sales guidance or sales orientation we gave this year, is what we are expecting to be to exceed 20%. As we see the trend right now, and with the volatility of the market, we are seeing much more to be close to 20%. But what is much more important for us is to focus on the profitability of the company and focus on delivering our EBITDA guidance. And you have understood that we are maintaining our EBITDA guidance within the range, the low part of the range, but within the range, and this is the focus we're gonna have for capacity adjustment. So Patrice, follow us on this. Yeah. What's your assumption in terms of volumes for Q4? In terms of volume for Q4, I mean, we do not see a recovery as we were expecting before the summer. So we see something which could be aligned, but again, you see the high volatility, you see our customers' communication. I guess you have seen, for instance, LVMH, on the wine and spirits business unit. They communicated in Q3 the minus 14% in revenue, which is much stronger obviously on volume. So it's hard, it's hard to be assertive again, given the low visibility. But again, we do not expect a significant recovery in the demand at this stage, as we believe that most of our customers may continue to optimize their inventory and cash into year-end. So, this is the assumptions we have taken for reforecast, and this is why, again, with this low demand, we have decided to adjust capacity to the demand. And we are adjusting capacity to the demand in the smartest way. So globally, I can tell you that we are going to adjust around 20% of our total capacity production in the smartest way, because it means that you know that we always have some furnace repair in our schedule. So here, what we are doing on some cases, we are anticipating some maintenance with cold stop, and we'll restart accordingly with the demand, when we see the demand back. What is very important for us is to act with rigor and professionalism, to keep the control of our inventory, and this is what we are going to do. So we are going to adjust our capacity to the demand. Okay. Thank you very much. We'll take now our next question from Jean-François Granjon from Oddo BHF. Your line is open now. Thank you. Yes, thank you, sure, and good morning. You already answered some questions, but nevertheless, I just want to come back on the adjustment of the capacity. Could you be more precise on what you want to do to adjust the capacity? This is my first question. The second question, how do you see the volume trend or evolution next year in 2024? Do you expect for the volume, a recovery or better trend for the volume next year in 2024? The third question, how do you expect the spread effect in Q4? It was a good surprise for the Q3 with a positive spread effect, but what do you expect for the spread effect for the Q4? And for sure, what is the trend for the prices? Do you confirm some decrease of the price in Q3, and what you expect for the Q4? Thank you. Thank you. So about capacity adjustment, again, we are adapting to the demand. We are doing that in a smart way to limit fixed cost impact as much as possible. And we have some maintenance which was scheduled, and we are anticipating some of them, so it means that having some cold stop for the maintenance. And for overall, we are stopping one line. For instance, we have some furnace which is running with four lines. We are stopping one line, and so three will run out of four. And we will reduce the pool of the glass from the furnace. So all of that, I mean, is a good news, is showing our ability and flexibility to adapt to the demand, to keep the control of our inventory and cash generation. And what is much more important is that by doing so, we are preparing ourselves to for good economic and industrial conditions for 2024. Still, with the objective to close 2023, with a good EBITDA and financial performance. About volume for 2024, I mean, what I want to convey is that, again, we are very confident about the fundamentals of the market. So it means that medium and long term, we see the market growing. There is no doubt in our mind about that. As we already said, maybe we have to go through some quarters with variations, depending on the macroeconomics, depending on even on some geopolitical situation, in, in some cases. But to be a little bit more precise, we clearly expect the demand to improve in 2024, as the destocking impact by nature is temporary. The question is the speed and the extent of the rebound, and that will depend about end market trends and the macro environment, and the timing, as I've just said, about the 2023 destocking. It means that certainly we will see the recovery of volumes of market over time in 2024. We can certainly guess that Q1 is not gonna be an easy one, but we see some recovery during the year. And regardless, I would say, of a short-term demand trend, we remain very comfortable, again, with the industry, with our fundamentals, and just want to you to be conscious of the fact that we can deliver strong performance, even in an unusual weak demand environment. And this is, for me, a strong satisfaction with the work we are doing with the team. It is a strong asset for Verallia, and a clear demonstration of our resilience. So to make it simpler, fundamentals are still very positive, medium and long term. We see a recovery in 2024. When it's gonna take place, difficult to be definitive on that, due to the volatility, but it will come back. At least we benefit from the destocking, destocking effect ending, I guess, at the end of issue. So regarding, just maybe adding to the volume questions and being a bit more specific, just for the previous question from Francisco on Q4. Indeed, as Patrice said, there is not so much visibility, but in our outlook, to be more precise, we did consider a slight decrease versus last year, and knowing that last year was already with a lower H2 than H1. Coming back to the question on the spread. Indeed, very well noted that the spread in Q3 was, is, is positive, was positive. For Q4, as we speak today, we see also a slightly positive spread. So of course, comparison with the comparison and going throughout the year, we don't have the same magnitude of spread of H1. But we still see a slightly positive spread for Q4, and for sure, we will end the year with a nicely positive spread. And so for prices, actually, what we are doing now is with this smart pricing, we explained in July that we are applying some specific and moderate reductions. And we explained that our assumptions of inflation one year ago for 2023 were higher than what we see. So we are just giving back part of the difference. So we are still in that move in Q3, and in Q4. As for 2024, I mean, we are preparing currently our budget. We are preparing our assumptions for costs inflation. And today, we don't see a massive decrease in costs, but it's really depending on the nature of costs. We will again prepare to have the price evolution in 2024 with our customers to deliver a positive spread. Just to remind that our portfolio is with limited predetermined formulas, so price adjustment formulas. You know, every year, we assess the inflation of our costs, and we then prepare our campaign for pricing. Okay, thank you, Nathalie. Just, one point, a final point. For the spread effect, so if I well understand, you expect some positive spread for the Q4, so you are comfortable to expect more than EUR 300 positive spread effect for the full year. Is this okay with that? I said that it would be limited on the... It's getting very close to zero. So, we'll see. And again, let's be a bit cautious- Okay. - because you've seen the volatility of the costs, but yes, that could be close to it. Okay, thank you. Okay. Another question, please? We don't have any further questions on the phone at the moment. As a final reminder, if you would like to ask a question, please press star one now. Yeah, we've got now one more question from Alessandro Zacchini, from Equita. You can go ahead now. Thank you. Hello, everybody, and thank you for taking my question. Just to understand the trend in volumes. So over the last years, at least looking at the European market, so we had +3% according to your figures, in terms of volumes. Then, 2022 was +1.7. So it seems to me that, I mean, this short-term historical period, the industry was not so hugely positive influenced by some factors and so on. So what I am probably difficult for us to understand, and probably also for you, given this sudden slowdown in volumes, is to understand the stocking effect. Because if you could elaborate a little bit more on this, because it seems harder to understand this kind of sudden destocking from clients in Europe in the food and beverage business. So this is my first question. The second question is instead about your qualitative assumptions for next year. So you probably assuming positive volumes and positive price cost spread. So basically, you are still expecting that your EBITDA can expand in 2024. So just to understand your point. Thank you. Thanks. Thanks a lot for the two questions. So about the volume trend. I think, first of all, we need to step back a little bit, and look at the data, not just 2021, 2022, 2023. I think historical data, again, are showing that we see a food and beverage market being on a regular growth. And what we see is about a 2% growth. To say it differently, we see it growing per GDP, as GDP is evolving. What we need to recognize is that COVID has disturbed everything, and we have seen in 2020, the market slightly going down, but not so much. It was down below the -2%. And then, post-COVID, we have seen a strong reaction of the market in 2021. So strong recovery, so this is a growth between 2020 and 2021, could not seem as a regular growth. And then in 2022, again. And then we are now in 2023, seeing the market going down. And on top of that, there is obviously something which is related with the shortage of glass, which was taking place last year, and everybody trying to secure some supply. If you remember, in H2 last year, we were the overall industry, running after the demand, and to be able to well serve the demand. We were in a situation where there was a fright of gas supply, meaning some customer could have in mind that at a point of time, there will be a problem with business continuity. Even if ourselves, we are well prepared, and we had expressed a clear plan how we'll be able to ensure business continuity. But this was in the mindset of some customers. And we can guess as well, that some of the customer maybe increased stocks at the end of last year, before moving to 2023, and with some additional price increase. So all of that, for me, are three levels, which have lead to increase in stock of our customers. We have the 2023 market, which is slowing down, and especially with the summer, which was not at the expected level, so which is creating this slowdown. And this destocking effect, again, is going to end. Is going to end at a point of time, and we believe that is going to end at the end of the year. Because I do not see most of our customers increasing their stock or buying before the end of the year, but much more focused on cleaning their balance sheet and reducing as much as possible their inventory level. So assumption for next year, as it has been explained by Nathalie, obviously it's a little early to discuss about it, so we'll be back to you in February with our assumptions and with our guidance for 2024. But you're right. What I can say at this stage, first of all, we have the ambition to keep on growing our EBITDA. And for sure, we are going to use, as usual, our three level activity, and we believe we'll see some activity growth at least coming from this destocking impact we have in 2023. Two, spread. We are going to do what is needed to manage our spread, meaning mix, purchase price minus cost to be a zero plus. Then, as usual, we get our PAP activity, which will contribute to our profitability growth. Keep in mind that each time we are making 2% of cash cost reduction, which is the objective of our PAP, we are increasing our margin by 120 basis points. What we can say, compared to this year, the profile and the impact of this deliver is gonna be different. We can expect activity and PAP to contribute, and spread to be a zero plus, not as what we see today. So this is what we are working on again with all the divisions, working on the assumptions, trying to understand them better, the market, and what it could be next year. And then, we will be back to you at the end of February 2024. Okay. Many, many thanks for your explanations. ... As a final reminder, if you would like to ask a question, please press star one now. As we currently don't have any other questions on the phone, we are going to hand now to the webcast questions. Okay. I think we just had two written questions. One relates to the pricing outlook for 2024, but I think Maurice covered that. Yep. And the other question relates, for Q3, to the volume split between Europe and Latin America. So, in Q3, in fact, I would say the surprise or the lower volumes is really from Europe. If we focus on Latin America, we have an increase in volumes in Brazil, as I commented. And in fact, we're in the same situation as H1 for Chile and Argentina. We already told you in July that we saw some slowdown in both countries. So it is a little bit better in Chile and Argentina in the continuity. But in Brazil, we see an increase in volumes in this geography. And we benefit also from the additional furnace that we started at the end of last year. So, very, very happily. And I think that's that in terms of written questions. Wait. One more. Apparently, there's one more question on the phone. Yeah, we've got one more question from Jean-François Granjon. I'm going to open his line then. Yeah, your line is open now. Yes, yeah, thank you. Jean-François Granjon speaking. Just two questions. Could you give us the split of the sales for the Latam between Brazil, Chile, and Argentina? And the contribution also on the percentage or the contribution for the EBITDA. And the last question concerns the one-off. You mentioned some one-off for the other impacts on the EBITDA. So you mentioned the positive contribution from Ardagh Glass, but you also mentioned some one-off costs. Could you come back about that? Thank you. Yes. Hello, Jean-François Granjon. Good morning. So we don't give, you know, the split that you ask for, for sales by country. But in Latam, Brazil is by far the largest country. That's the only thing I can tell you. And it has been the growth is in Brazil, and this is where we are adding capacity. So we already added one furnace, again, that is now fully contributing. And thanks for the... I mean, the contribution of the region, you know, Latam is around 10% of our activity, but I cannot say too much more. In the other pillar, actually, when I mentioned some specific negative one-offs, it would be- it will be, some cost for some quality topics or, you know, under Petropolis topic that we had in Brazil, that is a customer where we booked some provisions. So that's this type of one-offs, so it's not so significant, but we current- we show it in the other column. And then you have the -EUR 4.6 million, still of the IFRS 2, you know, accounting on the UK acquisition. That is, of course, a temporary one that we won't have next year. Okay. Thank you. Okay. So if there is not any additional question, could you confirm that we do not have any additional questions? Yeah, we don't have any other questions now coming on the phone. Okay. So thanks a lot. So thanks a lot for your attention. Thanks a lot for your questions. And please, let's see us in February next year. Take care. Bye-bye. Thank you very much. Bye-bye. Thank you for joining today's call. You may now disconnect. Thank you.