Q2 2020 Ardagh Group SA Earnings Call
Hello, everyone and welcome to the second quarter Twentytwenty results webcast. So that's all participants will be in listen only night and after what's there would be a question for fashion.
Please note that this is being recorded up.
I will now have <unk> co founder Chairman and CEO. Please begin handles bill.
Welcome everybody. Thank you very much for joining us today for our second quarter.
Earnings call, which follows the publication earlier today about our results for the quarter with me today, it's usually there David Matthews, our CFO, John Murphy, our COO and John She in our corporate development and Investor Relations Director.
As is usual RMR will include certain forward looking statements.
These reflect circumstances at the time, they're made and the company expressly disclaims any obligation to update or revise any forward looking statement.
Actual results or outcomes may differ materially from those that maybe expressed or implied due to a wide range of factors, including those that are set out in our SCC plotting a news releases.
Our earnings release financial report and related materials for the quarter can be found on our website at <unk> or not group Dot com information regarding the use of non-GAAP financial measures May also be found in the no section of the release, which also includes a reconciliation to the most comparable GAAP measures of adjusted EBITDA and adjusted earnings.
Sure.
Details of our statutory forward looking statements name or can be found in our STC fighting.
Before I moved to discuss our results for the quarter.
I would like to acknowledge the dedication shown by our 16000 colleagues over recent months.
Their outstanding commitment has enabled our Dod to continue to play its role.
And your fiction functioning of the essential food and beverage supply chain.
The top force, which we established in February lots to coordinate our pandemic response.
That's been highly effective and our priority remains providing a safe and healthy working environment for all our employees lots at the same time, serving our customers.
So turning to our second quarter results, where I will focus on constant currency performance.
And so revenues for the quarter of $1.61 billion were 5% lowered the second quarter of 2009 gain and this is comprised of 3% production in volume and mix and the pop through of lower input costs.
Adjusted EBITDA of $271 billion compared with the prior year constant currency of three or $5 million with growth in medical packaging offset by lower earnings in glass packaging, where our exposure to on premise demand is higher.
Our second quarter performance represents a strong result in an unprecedented macro economic environment.
I would turn was underpinned by our business makes focused on supplying sustainable convenient and cost effective consumer packaging to leading food and beverage brand owners.
We estimate that approximately 80% of our products are sold through a premised on retail channels and this has mitigated the impact of premises closures for much of the quarter.
[noise] trends towards the end of the quarter were positive.
Blocks and began can be lifted in most of our market.
Turning to the results by segment metal beverage accounted for over half of group revenue and EBITDA drinking water and recorded a strong performance.
Total beverage kinda shipments in the quarter increased by 3% compared with 2019.
Led by high single digit growth in Europe.
In the Americas unit shipped were down low single digits during the quarter compared with prior year due to weakness in Brazil in the early part of this quarter.
Specialty can volumes shipped group wide increased by 9%.
Revenue in metal beverage packaging Europe for the quarter of 395 million was 1% lower than the same period last year, reflecting volume truck mix growth of 2% offset by the pass through of lower aluminum input costs.
Units shipped in the quarter increased by 8% as our balance present in beer carbonated soft drinks another fast growing beverage categories continue to serve us well.
Adjusted EBITDA for the quarter of $70 million was in line with the same period this year.
As volume and mix growth and the strong operating performance was offset by covert related costs.
In metals, averaging Americas revenue for the quarter was 435 million on this represents a 5% reduction compared the same period last year, reflecting volume mix growth of 1% an improved contract pricing, which was offset by the pass through of lower aluminum costs.
Volume shipped in North American the quarter were in line with the prior year.
This followed first quarter growth this year of 7% and a 15% in March as pantry loading pulled some demand forward from the second quarter 2020.
Demand remains strong across all categories in North America on our capacity is fully sold for the remainder of the year. We're currently investing to support our customers continued growth driven by new and expanding beverage category and ongoing sustainability ships.
In the second half of 2020, we will benefit some of these investments and expect to resume growth in shipments.
In Brazil, where the closure premises had severity impacted industry volumes in March and April this year shipments recovered strongly in May and June recouping much of the RDR decline.
Brazil remains a highly attractive market and we expect of recovery in volumes to be some stage.
Second quarter adjusted EBITDA in beverage cans in met in the Americas increased by 5% to $69 million compared with the same period last year I'm strong growth in North America was partially offset by a lower I've turned in Brazil.
Growth was driven by continued evolution of our business makes toward stronger performing bad pass grade contracted price increases on a strong operating performance across our plant network.
If I turn to glass packaging, our businesses performed well.
In the climate in which they offer as you'd given the and given the greater level of on premise consumption in both Europe and North America.
Total shipments in the quarter declined by 9%, but trends were positive in June as restrictions began to be lifted.
In glass packaging Europe revenue $368 million for the second quarter was 8% lowered the same period last year lower revenue reflected the 10% reduction in volume mix and the posture of lower input costs and this was partly offset by contract price increases.
My end use category demand in food and strong offset by declines in other categories.
Adjusted EBITDA in Europe for the quarter of 76 million was 21% lower than the second quarter of 2019.
Principally reflecting lower volume mix and the under absorption of fixed costs as a result of such lower production.
Revenues in glass packaging, North America declined by 6% to 409 million compared to same period last year volume mix declined by 6% with a greater fall in April may followed by growth in June.
As in Europe beer demand was lower with other major categories broadly in line with prior year levels.
Inbox North America second quarter, EBITDA was $56 million and this was 23% below the same period last year again, reflecting lower volume mix unabsorbed fixed costs.
So if I turn to our current view of our markets.
Demand in the second quarter evolve pretty much in line with our expectation, although the recovery in Brazil with faster than we had expected.
And while it's too early to assess how consumers will react in the new environment. We would currently characterize market conditions as follows.
In masking beverage packaging the European markets remains healthy on our balance and broad end markets mix should continue to be a possible.
Market conditions and beverage Americans remain favorable with a continuing strong backdrop in North America.
In Brazil, the environment has been more volatile, but the market has recovered well during the quarter and prospects are underpinned by continuing.
And continued substrate chips from returnable glass bottles and Brazil.
In each of our beverage can markets, we're sold out for the remainder of this year.
In glass packaging, both in Europe, and North America trends in June were encouraging.
And the progressive relaxation of Lockdowns and other restrictions will be important in the coming months.
And in the context of this market assessment and.
And then and in our with our inline with our current expectations.
We expect a single digit decline in constant currency EBIT da for 2020 as a whole.
Turning next to our investment growth projects.
The implementation of our business growth investment program continued during the quarter and with with the year to date spend to the end of June of just over 75 million us.
Unless there's been some slippage and timing due to covert.
These projects remain a strategic priority for the group with each being backed by customer contract and they are individually to leveraging in their own Raj.
Turning to liquidity and capital structure.
In parallel with a strong operating performance, we unveiled attractive financial market conditions during the quarter to significantly in France, our liquidity and capital structure.
In early April we issued 700 million off.
During 2025 bonds to augment our liquidity.
We ended the quarter with total available liquidity of $1.6 billion, which included $1.45 billion in cash.
In May and June we refinanced our 2022 and 2024 debt maturities to late 2026 as well as over half our January 2025 unsecured maturity was extended and refinanced two late 2027.
And following these opportunistic moods, our average debt maturities now six years with no bond maturities before 2025.
So to conclude.
Our performance in the second quarter was strong and metal beverage and our glass packaging business businesses successfully manage.
The most challenging environment, we faced in many years and as we look to the future are well invested asset base longstanding customer relationships highly committed team at a strong capital structure position us well to benefit from further improvements in market demand.
So having made these opening remarks will now be very pleased to take any questions, which you may have thank you.
Thank you.
Dealers to ask your question. Please see another one on your comments on key PAB now.
Our first question comes from the line all Anthony Pettinari from Stifel. Please go ahead. Your line is now open.
Hi, good morning.
Good morning.
Paul you've talked about being sold out in all of your regions in the beverage cans, which echoes some of your peers and you've talked about the growth investments. Just wondering if you could give you know to the extent that you can any more color on.
Amount of capacity that you may bring online timeline. If these projects are coming online sort of as expected if you've seen any disruptions for co bit et cetera.
On the the capacity in the U.S., we haven't seen their their current the ongoing capacity is being brought on as we've said before and they are our investments I know increased capacity will be within our existing facility throughout building a new facilities at present.
So that means they'll come on raised me quickly there coming on stream they'll be on some of the Onstream by later this year I had been next year.
The market is very strong demand is very strong and.
Where we're very comfortable increasing our capacity.
Okay, and then there was a come in at the beginning on on 80% of your sales off the two off premise and I was just without a comment on metal and glass and I'm just wondering if you could.
Give a little bit more detail on on the percentage of on premise per class higher 'cause sunquest.
Well as these things are very much that's an overall number around today on these things are very much.
But calls in terms of plot on an estimate of where we see it and what we were trying to do with to give you a flavor that quite a lot of our business for instance, most of our best campuses virtually all of it.
It is.
It's off premise.
You know and we've seen a lot of strength, obviously in the back on.
In that kind of demand, which I think was there any way pre co, but I don't think coupled with its just a exacerbated the demand.
Okay understood I'll turn it over.
Thank you.
Thank you. Our next question comes from the line all that Brian Maguire from Goldman Sachs. Please go ahead, Sir your line is not a bump.
Hey, good morning, everyone.
Paul just what I'm thinking a little bit more color on the inter quarter trends and sort of the entry rate into two Q and a couple of businesses.
I guess in Bev cans, it's pretty clear it's sold out so.
Probably not a huge change in trend the glass seems like I heard your right. There was material improvement as the quarter, but I did you say that.
Hi shipments were up in June in both Europe, and then the U.S. and then.
Within that in the U.S. market I'm, just wondering if you're seeing any.
Spillover benefits from the can being sold out like.
Increased demand for beer bottles and things like that is people maybe you have to put.
Their product there may be there second choice for substrate are you getting any spillover benefits to glass business from that.
We are we are theres no doubt that's happening some that's happening because there's been increased demand for for glass bottles and their own right, but there's certainly been some spillage.
Cross because of the tightness in kind so we are.
It's very hard to breakout Brian well, what's the cause of this but there's certainly been we're seeing increased on strong demand for for beer bottles in the U.S., yet, which is which is that from our point of view a good trends.
And I just ask.
Glass trends through the quarter into into July.
Our glass glass trends through the quarter, improving as the quarter went Dodd.
Particularly and if you look at Europe, where where obviously the lifting of the restrictions is probably more advance that that in the U.S. than and Ah, Yes, we've seen good improvement there.
And that improvement has continued into July.
Pretty much the same trends in the U.S. as well.
Okay.
And then once the JV income I think was ER was fairly high in the quarter and obviously be heard good food can.
Earnings from Silgan yesterday, and just wondering if there aren't any onetime items and that as well or S.
You think that Thats, a repeatable number yes, if current conditions continue.
I'll pass that to John at the moment, but as you know trivia will report next week, but.
As we've said before trivia is experiencing a good strong conditions and food cans and some weaknesses elsewhere, but that does strong conditions improved cut with they'll they'll report next weekend.
You'll you'll see where out where they're at John you want to comment on the other point the broad drive.
Yes, sure Brian in relation to Trevi them in the second quarter. The contribution I think at the Epstein, it's about eight cents or so as it's a bit of a tool up there for the the finalization of that.
SAP purchase accounting so.
You know in a full year I think it using tribune kind of run rate the contribution would be something into the mid to upper teens sense to our dot. So I wouldn't extrapolate the contribution that you see in Q2.
Okay, Thanks, very much quicker.
Thank you.
Thank you.
It comes from the line from Mike Leigh Public from Barclays. Please go ahead, Sir your line is not a buck.
Great. Thanks, guys I guess first question just on the European beverage can business I think if I heard correctly, you mentioned unit volumes were up 8% this quarter, which feels a lot better than the macro and a lot better than one of your competitors report earlier. This week. So I was hoping you can give just a little bit more color.
Sure.
Around the strength in that business this quarter.
Well I did say that helps the numbers are the numbers Mike.
Yeah, we've a very broadly based business in Europe button, the markets, where we on both in product and geographically.
We've seen an on demand.
You know, it's not just as about patent story is it's not just about North America in Brazil, but.
Where we are feeling.
Very comfortable unhappy with the performance of our European business. So it's right across the piece.
Okay Fair enough and then I think it's encouraging that you do have a little bit more visibility in your outlook you talked about EBITDA constant currency forecast for the back half of the year can you just help us with it if we assume kind of FX rates stay where they are what you're assuming or what you expect in terms of.
FX impact this year the EBITDA.
Yeah, David you want to deal with that well I think it's going to turn out to be broadly neutral because the currencies moved in the last few days, but I think it's going to end up being broadly neutral lets us as it does a headwind as we go into the healthier habits as of today.
I think workshops in the second health, we broadly neutral.
Okay. Thank you.
Thank you next question comes from the line of Roger Spitz from Bank of America. Please go ahead. Your line is not.
Thank you good afternoon.
You want to care to talk about Q3, EBITDA and how that might look any thoughts you can tell us.
No I don't think we'd want to get to go any further write Rogers and the indications that given on where we see the upturn for the year.
You know, it's a pretty volatile environment, but I think.
But as we as as we see it at the moment given our current condition.
The upturn for the year as such.
Hi.
Glass Europe, and USA separate from Morningstar fix cost of our production.
Can you provide any sense to the impact EBITDA from.
Each of these from us in Europe, as opposed to lower sales volumes themselves.
No I think it's an overall mix I mean, obviously, we've had some dark direct costs as result of Coke and things like protective equipment and stuff like that extra cleaning costs et cetera et cetera.
But we haven't Weve expense them, all we have an exceptional I've got the got got that's all gone through against our EBITDA. So it's a mix of a number of factors volume mix reductions leading to lower production, leading to some lines down obviously, leading to under absorption of fixed costs et cetera, It's a whole mishmash.
Got it.
Give any sense of year glass operating rates in Q2 and.
Europe.
In the USA.
No that's not a number we give out.
Fine last late.
Last quarter, you said based on growth Capex, just 50, anticipating respectively are those still good number Steve.
I think in terms of maintenance Capex 330 million is probably our expectation for the year, that's a little bit down from the 350, we talked about previously.
On business growth. We you know we as I said, we spent 75 million in the first half we expect to spend between another 125, another 150, which would make the total to 25 for the year.
Thank you very much.
Thanks.
Thank you. Our next question comes from the line up at market, while Lee from Bank of Montreal. Please go ahead. Your line is not a bad.
Good morning, Paul.
Hi, Mark how are you pack.
Good I'd like to just come back to the.
The model lacking in North America, just to try to get some kind of guidance as we think about sort of 2021 and 22 in terms of.
What that incremental expansion looks like in terms of just unit volume.
You mean our expansion.
Yes exactly.
That's not a number.
But when we would give out mark right, so, but as they say its expansion that tied to customer at long term customer contracts and also it's within our existing facilities. So we're increasing the number of lines within our facilities, but we're not building any new plans.
Okay.
All right.
Let's see can you also can you update us on the situation with that.
US trade case on glass with with China.
Yeah, well, let you know there's two sets of but tariffs there at the moment Mark one is the.
The ones that were imposed by the government trend there 20.
25% targets on China, they remain in place.
At the international trade court that process is still ongoing.
We lost during the last year, we won the first time lost the second time and.
They are the process is still ongoing but no targets have been introduced on because of that process.
Still ongoing we'll see.
See where it ends up.
But the I think the expectation is that certainly we'll have the continuing chart on the Chinese imports that the government imposed at the very pleased.
Okay, and then I wanted to just turned to to Brazil, I see that that.
Well, you've got a customer a large beverage producer down there that has restarted it's a it's program of adding a new can plant.
I think that's their first can plant in Latin America can can you share some thoughts with us on why you think theyre doing at and what you expect its impact to be on the market.
Well I think the reason is that they that particular.
Brewer is switching from larche returnable glass and remember we're not in the glass market down there, but returnable glass bottles to can which is where their competitors.
I have bad and they've made this investment because they share volume of cans that they need to switch from returnable glass to Ken is quite substantial.
And they will need more they will need more capacity than than they are building. So they will need to but they will need supply from the other players in that market. So we don't feel that that's going to disrupt the market in any way at all their activity of switching their commercial activity of switching.
From returnable glass to cans is very much positive for us on the other bev can producers there.
Yeah, I get the kind of glass going to model I'm, just kind of curious we haven't really seen big beverage companies backward integrate into cans or glass recently, so I'm just.
Im curious about why you think they're doing this rather than just contracting with kind of existing players to expand capacity.
Well I think if the once off I don't think it's a trend that's happening elsewhere, either within that group or or on the country I'd say.
And they may be if people were looking for that kind of approval now within the brand companies that might be forthcoming, but I don't know but I.
I think I think it to once all.
And I think the reasoning behind it is that.
There is such a big increase in cans down there because of this conversion and also the market's drop me, where we're seeing very strong very very strong conditions down there and we're well placed it.
If theres a need to increase capacity down there to to supply the market.
We can do so quickly and within our existing facilities, we treat plants out there.
Okay, all right I'll turn it over thanks Paul.
Thank you.
Thank you. Our next question comes from the line.
James from Deutsche Bank. Please go ahead your line is now.
Hi, Thanks for taking my question.
I wanted to hi.
I'll add on metal supply that I, just wanted to ask going again given that.
Thank you for additional capacity announcements from North America, and elsewhere and I think there was an article this morning in the Wall Street Journal addressing imports.
Ceded to the U.S. from.
I'd like to understand how much visibility you have are you in for your customers curing aluminum can sheet.
Yes.
I think we're pretty comfortable in the arrangements we have Debbie.
No I mean, I'll ask John later to give you any more specifics up but I think where we're pretty comfortable.
With the arrangements that we have and we're not certainly seeing as we look forward to those years.
We're not seeing stresses in the supply chain.
John is there anything you'd like to add yeah, I think Debbie Tom.
You know, we feel comfortable with that obviously some with the other end markets to quit chat aluminum has gone.
Our internally a tougher time.
Being much more cyclical over the next while so you've seen an umbrella.
The producers indicates that.
It would be an area that there will be expanding in so we don't see any issues.
Okay, great. Thank you and my second question.
When we talk a bit in this sector about improving recycling rates than I think glass in North America is a notable plate.
Mike to see that increase.
Just wanted to get your thoughts on.
What what are doing where you think that rate can go in the U.S. and I think also very important Keith thanks.
The recycling rate North American creative does that increase the attractiveness to your customers from sustainability endpoint.
Well dealing with the latter point for our sustainability is huge issue for our customers and.
Recycling as huge part and sustainability and this is an area, which we're very focused Jim are also very focused on improving the supply of colors in the United States that that's that's a very important thing for us.
It's a major problem because far too much goes to landfill. The collection systems are not the way they are in Europe, and Oh since our business is a long way to go but.
The good thing is that there are some levers that we can pull and improving the the collection systems with our customers. Some of the some of our bigger customers are are in the United States are working on improving collection systems.
Probably guess, what I'd say things of Paul to bid during the cold, but think Debbie its probably not been top of everyone's mind.
Might imagine but.
I think some are bigger customers are working.
With local communities et cetera to to improve the the levels of collection and we're working to see and we will invest to see improved quality systems for ourselves. It's something that we do not have the same supply of call. It in the U.S. glass businesses, we have in Europe, both from a.
From particularly from a quality point of view, so it's an area where it is much improvement to be gos, but at least the good news is the improvement can be gone.
Okay. Thank you got anything just ask one follow up I was curious just because of everything we co betting the impact on recycling. It is the reduced amount having material impact on your margins and does the western Europe.
Have reduced amount of.
Got it lightly.
No we haven't got hadn't any issues.
I don't like that issues.
In relative terms to the U.S. pre and post cobot certainly not sure.
Okay. Thank you.
Turning to right.
Thank you. Our next question comes from the line of Travis.
Some Goldman Sachs. Please go ahead, Sir your line is not a fan.
Hi, Thanks, and good morning, just a quick one maybe a bit higher level just you completed a few.
Transactions in April June regarding your capital structure, just wondering at high level, how you're thinking about the capital structure. Now are you satisfied with the current state of things as you've improved liquidity pushed out maturity wells and then I guess second parts. This question would just be has visibility sort of improved on the earnings front can you give a little bit of color on expectations for the full year any changes or color on.
On your expectation for de leveraging getting back to sort of your four to have types target.
I guess, a pause or for any color you can share.
Yeah look I think we're very happy with what we did and the debt markets and we we took advantage of a situation where the fed with supporting the bond markets, where the European Central Bank with supporting them and were.
You had strong performance in the equity markets. So.
If you can U.S. so.
That led to opportunities for us to refinance to raise liquidity in the first in which we did early on very early on in this whole.
Pandemic situation.
And then as the quarter evolved enabled us to refinance and extend our maturities on at very very attractive rate. So I think by and large for the most part are out we're very happy with where the capital structure is.
That might be a bit of tinkering at the edges, but nothing nothing material there at all.
I think as we see as we as we move towards the end of the years he moved through the year.
You know, we obviously got quite a lot about kind of liquidity on our balance sheet cash on our balance sheet at the moment I think it's likely that we will we will seek to two to reduce that amount by perhaps reducing the amount of drawings under.
Our ABL facility.
Before before the end of the year, we'll wait and just make sure that.
The year is evolving as we expected to and but you'll remember we made that drawing at a time when we know how financial markets, we're going to react on perform.
And how indeed, our business was going to react and perform so.
I would say that we've had.
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Good results in both our business and could result in terms of.
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Not working very well.
Here figures, we published and the ended the year, but obviously as we hope.
We resume increased EBITDA and EBITDA growth at more normalized EBITDA.
In the coming years, we would bottom with that de leveraging.
Great. That's really helpful color appreciate that and just lastly, I think.
Generally asked every quarter, but was wondering if you haven't updated RP capacity number and then off on that as you talked a little bit about reducing liquidity, maybe pay got studio borrowings.
Any chance that some of the cash that you've got now goes upstream to the holdco.
Well first of all.
The RP capacity at the moment of $650 million.
The only flows that we're expecting to the old co are the normal quarterly dividends at the moment Weve nothing else in mind moment.
So you'll see the whatever it is the 15 cents quarter, that's which out which covers solvency our share of that and OCO covers the interest on the on the toggle notes, which we will continue to pay so that's the that's the only plans we have at the moment for distribution upwards.
Perfect really appreciate the time to Golar seal.
Thank you. Our next question comes from the line on the Cape Haiti from Wells Fargo Securities. Please go ahead. Your line is now Ben.
Good morning, Thanks for taking the question hope Youre doing well.
Good morning.
Paul I know I appreciate that you don't want to give out specific numbers, but just I guess given the magnitude of of what you're investing that the 225 that you called out.
I think that would equate to animal three to four lines on the beverage cans side.
I know you talked about maybe a couple of cost reduction measures in there as well but.
Can you comment at all if that's all isolated to the U.S. or if you are adding any capacity in your beverage can operations in Europe.
And I guess sort of coincided with that question.
You talked about 8% volume growth I think in the press release, it talks about 2% going mix.
That's just a function of lower specialty can growth in Europe.
I understand that.
Okay, that's John Chen to deal with the latter question.
I think look in terms of our investment the business growth, it's right across the piece, it's across the five business units.
Is skewed more tobacco can give us, but it's right across the piece and it's the mixture different things so its and in the three about 10 units, Brazil, U.S. and then.
On Europe on its the same and glass in North American dots in Europe, so different things in different places.
Mixture.
John do you want to touch on the the shipments versus.
The volume mix.
Okay.
Yes, sure and David shipments growth they were skewed India and the second quarter gave towards standard in Europe, and then the second thing with the yet the IRS 15 effect.
As an impact there just in terms of the the revenue coming in.
And then also there's a path to fill up lower aluminum costs, which add meant that the shipments don't get fully reflected in the revenue line.
Okay, and then I guess somewhat related lead to utilization rates in Europe may be industry or yourself.
We have some other competitors talk about.
Unacceptable returns and in certain geographies within Europe I'm curious if if you guys are seeing that or if you're happy where sort of your contracts our landlord.
Commercial opportunities.
Well I think we need to see improvement in in margins in Europe, and we need to see improvements in pricing and I think we are saying that on were cycling our way through as we mentioned previously some contracts that.
You know.
Taking a while to run off.
I think were weak.
I saw those comments and I think there correct I think.
We need to see proper pricing on improved pricing and I think that Tom it's interesting.
At this period has shown to our customer base and.
To the market generally how important.
The outcome, the kind or the glass bottle and put that to talk about candidates first how important is to the brand owners because if they can't get the stuff that they can't get the stuff into captains, they're not going to be able to sell it and I think people to have realized that.
Those who have focused on on pricing et cetera have found themselves the charge and we certainly focused on.
Improving our margins and improving our mix.
And.
Operating with people, who value the product that that we produce and how important it is for their brands.
Because if you've got a brand that you've got demand for you can produce the the liquid or at the juice that you know that's no. Good if you haven't got the the supply of high quality cans or glass bottles that to put it on the shelves. So I think there has been an improved realization that and.
That's the good thing because it's been forgotten about sometimes in the past.
Thank you for that.
Two more quick ones if I may.
Can you kind of comment a little bit on the glass side in Europe, specifically I know that there was some capacity coming to the market.
To service different I guess.
Categories.
And now we've seen kind of a step back with co that.
How would you anticipate kind of commercial discussions evolving for for next year. I mean are things still pretty tight I know price has been kind of a contributing factor to the positive side over the past couple of years.
We're comfortable that.
It will be in balance I mean, we'll have to we've got some lines John at the moment, but theyre down because of reduced demand because the covert dead.
As I said earlier, we're seeing us the restrictions are lifted in the economies in Europe, we're seeing that improving.
The speed at which those lines come back and that capacity comes back.
It is.
Well, we'll have to see what happens, but I mean, where our expectation is that.
Well, we will lap demand and supply of held back relationships very important to have in.
In line and we expect that to be the case.
And I go back to what I said in your last question about.
A greater understanding of the importance of the supply chain amongst our customer base.
Understood last one for me.
Can you give us a sense and I appreciate quite honestly sitting here in a ivory tower, sometimes we don't appreciate how difficult is around these businesses, particularly given what's happened over the past one month, but.
You have a sense for inventories either within your system and or your customers.
And how it may impact kind of your working capital need or.
Bill.
For this year.
While our inventories are higher than they were at the mid year last year.
Great Tyson certain of the Pepco jurisdictions on on inventories, obviously with the market's sold out.
On the glass side.
They are higher, but we expect to to normalize them and deal with the situation over the balance of the year, obviously with license down.
Particularly.
We will reduce inventory. So we were looking at this the other day US I don't think I don't think weeks, we anticipate any problems by year end.
In some cases, thank you here.
Two short of inventory, but overall, it's got a bit it's got to go a distance to come down a bit, but we expect to normalize.
Thank you Paul.
Okay.
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Great. Thanks, that's my questions have been answered so maybe I'll ask a question on sustainability.
Have you noticed any shifts and sustainability and behavior there amongst your customer base.
Yes is there an increasing.
Appetite for cans and away from plastic or has there been maybe a move back to plastic just given.
Some of the barrier properties there what are you seeing as far as cans versus plastic.
Well, we're seeing I think the fact speak for themselves in terms of the demand for Ken how much of that is.
You know, it's very hard to.
Right subscribe described thing to whether that sustainability, whether it's a particular product whether its patterns of consumer behavior, changing with cobot et cetera, et cetera, but I think we're certainly not seeing shifts back to classics from cans and you know.
All as I can say is just the demand for cans worldwide in the markets. We operate in is incredibly strong and we're very comfortable on and we think some of that quite a lot of that is or some a good portion of it is driven by sustainability issues sustainability issues for for our customers and in turn their end users are.
Our our major thing they certainly haven't gone away just because of cobot.
I mean to focus on our customers on sustainability, our sustainability policies.
Our is very very strong and it's a big part of our discussions with all our customers.
And then I guess on a related note.
Given that that commentary I guess do you expect.
Both of your beverage and glass businesses.
But there are structurally better now post covance given kind of higher.
At home consumption levels.
Well that remains to be seen I think domains to be seen whether demand structures change permanently or whether you know.
See I think probably.
Sure you're likely to see at least for for the you know for the short to medium term.
More.
Off premise that consumption.
Then perhaps was previously the case as people are nervous about going into bars, and restaurants and things like that so inevitably whether our businesses.
That are structured.
So sure, but we will do a structure our business to meet the demands of the day. So as the markets evolve yeah, we'll seek to be nimble enough to change our structures.
Okay. Thanks.
Thank you.
Thank you and then they said a question so that just said at the moment I will hand, it back to you Paul for any final comments. Please go ahead.
Good. Thank you very much everyone for for joining us today and.
Make sure to look out for yourselves and the stay safe. Thank you very much.
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