Q4 2023 Ardagh Metal Packaging SA Earnings Call
Operator: Welcome to the Ardagh Metal Packaging S.A. 4th Quarter 2023 Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Stephen Lyons, Investor Relations. Please go ahead.
Welcome to the Argos metal metal packaging S. A fourth quarter 2023 results call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Stephen Lyons Investor Relations. Please go ahead.
Stephen Lyons: Thank you, operator, and welcome everybody. Thank you for joining today for Ardagh Metal Packaging's fourth quarter 2023 earnings call, which follows the earlier publication of AMP's earnings release for the fourth quarter and the full year. I'm joined today by Oliver Graham, AMP's Chief Executive Officer, and David Bourne, AMP's Chief Financial Officer. Before moving to your questions, we will first provide some introductory remarks around AMP's performance and outlook. AMP's earnings release. Related materials for the fourth quarter can be found on AMP's website at www.ardaghmetalpackaging.com. Remarks today will include certain forward-looking statements and include the use of non-IFRS financial measures. Actual results could vary materially from such statements. Please review the details of AMP's forward-looking statement disclaimer and reconciliation of non-IFRS financial measures to IFRS financial measures in AMP's earnings releases. I will now turn the call over to Oliver Graham. Stephen.
Thank you operator and welcome everybody. Thank you for joining today for our metal packaging <unk> fourth quarter 2023 earnings call, which follows the earlier publication of a M. P's earnings release for the fourth quarter and the full year.
I'm joined today by Oliver Graham and Peace, Chief Executive Officer, and David Bourn, A&P as Chief Financial Officer.
Before moving to your questions. We will first provide some introductory remarks around A&P is performance and outlook.
M P's earnings release related materials for the fourth quarter can be found on a M P's website.
Www, Josh alright that metal packaging dotcom.
Remarks today will include certain forward looking statements and include use of non <unk> financial measures.
Actual results could vary materially from such statements.
Please review the details of A&P as forward looking statements disclaimer and reconciliation of non <unk> financial measures I have fresh financial measures in Anp's earnings release.
I will now turn the call over to Ali for Graham.
Steven.
Oliver Graham: 2023 represents a year of transition for our business as the team navigated a challenging macro demand environment and took decisive action on our footprint and inventories to position the business for growth in 2024 and beyond. Despite the market context, in particular softer European demand, we achieved record global revenues and shipment volumes, which grew by 5% for the full year and 2% in the fourth quarter. Our America segment grew at an almost mid-teens percentage, driven by strong growth in both regions.
2023 represents a year of transition prop business as the team navigated a challenging macro demand environment and took decisive action on our footprint and inventories to position the business for growth in 2024 and beyond.
Despite the market context in particular softer European demand.
Achieved record global revenues and shipment volumes, which grew by 5% for the full year and 2% in the fourth quarter.
Our Americas segment grew at an almost mid teens percentage.
By strong growth in both regions.
Oliver Graham: Our actions on energy pass-through to our customers in Europe resulted in stronger inflation recovery, but this was more than offset by unfavourable volume mix effects, with a significant decline in production activity and shipments experienced in the second half of the year, which also impacted fixed cost absorbers. In Brazil, four-year shipment growth was below initial expectations due to consumer weakness and customer mix, which included a customer restructuring that is now resolved, but with an encouraging sequential improvement in shipment trends during the second half and a strong Q4 against a weak prior year comparison. Our team's efforts in working capital management in this challenging environment generated a near trebling of cash from operating activities, resulting in AMP ending the year in a robust liquidity position.
Our actions on energy pass through to our customers in Europe resulted in stronger inflation recovery, but this was more than offset by unfavorable volume mix effects with a significant decline in production activity and shipments experienced in the second half of the year, which also impacted fixed cost absorption.
In Brazil full year shipment growth was below initial expectations due to consumer weakness in customer mix, which included a customer restructuring that is now resolved, but with an encouraging sequential improvement in shipment trends during the second half and a strong Q4 against a weak prior year comparator.
Our team's efforts on working capital management in this challenging environment generated a near tripling of cash from operating activities.
L T in A&P in EMEA, and a robust liquidity position.
Oliver Graham: Our fourth quarter performance was negatively impacted versus our expectations by weaker than expected volume and mix effects in Europe, which was partly offset by a stronger performance in the Americas. European shipments deteriorated towards the end of the quarter and well below retail scanner trends, which were more positive. Reflecting what we view to be largely a customer destocking action, there was a clear divergence of performance by customer and geography, with a gravitation toward value brands and private labor. Our confidence in a stronger performance in 2024 reflects our expectations for volume growth in all regions, leading to improved cost absorption, in addition to our footprint actions. Inflationary pressures are moderating, and the beverage can continues to be the package of choice because of Customer Innovation and its Sustainability Advantage. We are committed to balancing our network capacity with demand through a mix of curtailment and longer-term action, as appropriate. The two remaining steel lines in Weissenturm, Germany, closed at the end of the year, as previously indicated.
Our fourth quarter performance was negatively impacted versus our expectations by weaker than expected volume and mix effects in Europe, which was partly offset by stronger performance in the Americas.
European shipments deteriorated towards the end of the quarter and well below retail scanner trends, which were more positive.
<unk>, what we view to be largely customer destocking actions.
There was a clear divergence of performance by customer and geography, and with a gravitation towards value brands and private label.
Our confidence in a stronger performance in 2024 reflects our expectations for volume growth in all regions, leading to improved cost absorption. In addition to our footprint actions in.
Inflationary pressures are moderating in the beverage can continues to win shares the package of choice.
By customer innovation and its sustainability advantages.
We are committed to balancing our network capacity with demand through a mix of curtailments in longer time as appropriate.
Steel lines and by some term Germany closed at the end of the year as previously indicated.
Oliver Graham: In North America, we closed our two-line facility in White House, Ohio, this month, which will improve network utilization to a more appropriately balanced position. These permanent actions will optimize our network and drive earnings improvement. With our well-invested global manufacturing base and a strong, diverse mix of customer relationships, we remain well-placed to benefit from a normalization in demand, which should drive further earnings growth over the medium term. During the quarter, the publication of our 2023 Sustainability Report highlighted our progress on sustainability initiatives. The recently announced supply agreement with Novellis in North America for supply from its greenfield development will further contribute to AMP's metal decarbonization strategy.
In North America, we closed to Nymex to the team White has Ohio, this month, which will improve network utilization to more appropriately balanced position.
These permanent actions will optimize on that work and drive earnings improvement.
Well invested global manufacturing base and a strong diverse mix of customer relationships, we remain well placed to benefit from a normalization in demand, which should drive further earnings growth over the medium term.
During the quarter the publication about 2023 sustainability report highlighted our progress on sustainability initiatives.
The recently announced supply agreement with Novartis in North America, the supply from its Greenfield development will further contribute towards Imp's metal decarbonization strategy.
A&P alongside other industry stakeholders participated in a cool fraction at cop 28.
And we look forward to updating you on further progress on sustainability during 2024.
Turning now our attention to A&P fourth quarter results.
We recorded a fourth.
Culture of $1 1 billion, an increase of 5%, which reflected favorable volume mix and higher input costs recovery, partly offset by the pass through to customers of lower input costs.
Oliver Graham: AMP, alongside other industry stakeholders, participated in a call for action at COP28, and we look forward to updating you on further progress on sustainability during 2024. Now, our attention is turning to AMP's fourth quarter results. We recorded a fourth-quarter revenue of 1.1 billion, an increase of 5%, which reflected favorable volume mix and higher input cost recovery, partly offset by the pass-through to customers of lower input costs. Adjusted EBITDA of $148 million was down 7% on the prior year, with growth in the Americas more than offset by a decline in Europe in excess of our expectation, which reflected customer caution and apparently stocking against a weak consumer backdrop Total beverage can shipments in the quarter were 2% higher than the prior year, with 14% growth in America offsetting a 10% decline in Europe. We had a strong cash performance, with adjusted operating cash flow approaching $500 million for the quarter and $680 million for the full year. This reflected our team's focus on working capital, in particular inventory management, and our ongoing reduction in capital expenditure.
Adjusted EBITDA of $148 million was down 7% on the prior year with growth in the Americas more than offset by a decline in Europe in excess of our expectation, which reflected customer caution and apparent destocking against a weak consumer backdrop.
Total beverage can shipments in the quarter with 2% higher than the prior year with 14% growth in Americas, offsetting a 10% decline in Europe.
We had a strong cash performance with adjusted operating cash flow approaching $500 million for the quarter and $680 million for the full year.
This reflected our team's focus on working capital in particular inventory management and our ongoing reduction in capital expenditure.
Turning now to A&P results by segment.
Revenue in the Americas in the fourth quarter increased by 11% to $705 million, which reflected shipments, Greg partly offset by lower input costs.
In North America shipments grew by 8% for the quarter and 13% for the year our.
Shipments growth was broadly in line with our expectations, which drove record profitability.
This strong outperformance versus the market reflects the contribution from customer contract commitments arising from our investment program as well as the diverse mix of our portfolio weighted towards non alcoholic beverages, including the high growth functional energy drink segment.
Looking at the market overall demand remained somewhat constrained by higher retail pricing and lower levels of promotional activity than historical norms.
Oliver Graham: Turning now to A&P's results, revenue in the Americas increased by 11% to $705 million, which reflected shipment growth partly offset by lower input costs. In North America, shipments grew by 8% for the quarter and 13% for the year. Our shipment growth was broadly in line with our expectations, which drove record profitability. This strong outperformance versus the market reflects the contribution from customer contract commitments arising from our investment program, as well as the diverse mix of our portfolio weighted towards non-alcoholic beverages, including the high-growth functional energy drink segment. Looking at the market overall, demand remains somewhat constrained by higher retail prices and lower levels of promotional activity than historical norms.
Industry demand trends improved in Q4, and we expect further improvement into 2024 as input costs moderate retail pricing stabilizes and consumers see real wage growth.
We're encouraged by our strong annual growth in shipments in 2023.
Line of contracted growth and good early momentum so far in 2024.
Our forecast for shipments in our North American business the growth by a mid to high single digit percentage this year versus the low to low single digit percentage growth for the industry.
In Brazil fourth quarter shipments increased by 34% against a weak prior year comparable outperforming the mid single digit increase in the market we.
We experienced encouraging sales momentum with a number of key customers.
Shipments grew by 3% for the full year, which was slightly ahead of the market.
We forecast modest shipments growth for our Brazil business in 2024, and we continue to balance our capacity curtailments of our network.
We are confident in the growth potential of the business, but remain cautious in the near term given the softness over the last two years.
The market has started the year strongly but we would highlight the earlier date for Carnival. This year, which may have had some impact in pulling forward demand.
Adjusted EBITDA in the Americas increased by 3% to $117 million in the fourth quarter as the contribution from higher volumes was offset by favorable prior year effects, which included a contribution from him fulfill customer contractual volume commitments.
Oliver Graham: Industry demand trends improved in Q4, and we expect further improvement into 2024 as input costs moderate, retail pricing stabilizes, and consumers see real wage growth. We are encouraged by our strong annual growth in shipments in 2023, our pipeline of contracted growth, and good early momentum so far in 2024. This supports our forecast for shipments in our North American business, growth by a mid to high single-digit percentage this year versus a low to low single-digit percentage growth for the industry. In Brazil, fourth quarter shipments increased by 34% against a week prior year comparable, outperforming the mid-single-digit increase in the market. We experienced encouraging sales momentum with a number of key customers. Shipments grew by 3% for the full year, which was slightly ahead of the market.
2024, we expect shipments growth in the Americas of a mid single digit percentage.
Shipments growth and improved fixed cost absorption will drive growth in adjusted EBITDA in 2024.
In Europe fourth quarter revenue decreased by 10% on a constant currency basis to $427 million compared with the same period in 2023, principally due to unfavorable volume mix effects.
The offset by higher input cost recovery.
Shipments for the quarter declined by 10% on the prior year sales volumes decelerated sharply towards the end of the quarter.
For the full year shipments declined by 2% with growth in the first half more than offset by the second half deterioration.
Consumer demand remains weak given household financial pressures, but the decline in shipments experienced by ourselves and the industry with broad based in significantly in excess of retail scanner trends in the quarter.
We believe this reflected elevated customer destocking into the end of the year.
Kinda trends also showed an improvement in consumer volumes towards the end of the quarter at odds with our shipments experience as customers took increased levels of downtime over the holiday period.
Oliver Graham: We forecast modest shipment growth for our Brazil business in 2024, and we continue to balance our capacity through curtailment of our network. We are confident in the growth potential of the business, but remain cautious in the near term given the softness over the last two years. The market has started the year strongly, but we would highlight the earlier date for Carnival this year, which may have had some impact on pulling forward demand. Adjusted EBITDA in the Americas increased by 3% to $117 million in the fourth quarter as the contribution from higher volumes was offset by favourable prior year effects, which included a contribution from unfulfilled customer contractual volume commitments.
Fourth quarter adjusted EBITDA in Europe decreased by 35% at constant currency to $31 million due to volume mix effects and reduced fixed cost absorption, which offset stronger input cost recovery versus the prior year.
Reduced production activity is finished goods inventory was right sized.
Expected resulted in higher fixed cost under absorption and a lower margin contribution unexpected from the period end contract asset.
We took action on our footprint with the closure of advice in terms steel lines at the end of the year and we will continue to keep our network under review to balance supply with demand and improve efficiency.
The 2024, we expect low single digit percent shipments Gary with a stronger performance in the second half.
Growth and improved fixed cost absorption will drive adjusted EBITDA growth in 2024, but partly offset by competitive pressure on a small portion of our business and some upstream cost increases reflecting elevated energy costs.
Oliver Graham: In 2024, we expect shipments growth in the Americas of a mid single-digit percentage. Shipments, growth, and improved fixed cost absorption will drive growth in adjusted EBITDA in 2020. In Europe, fourth-quarter revenue decreased by 10% on a constant currency basis to $427 million, compared with the same period in 2023, principally due to unfavorable volume mix effects, partly offset by a higher input cost recovery. Shipments for the quarter declined by 10% on the prior year, as sales volumes decelerated sharply towards the end of the quarter.
I'll now briefly hand over to David to talk you through our financial position before finishing with some concluding remarks.
Thanks, <unk> and Hello, everyone.
We ended the year with our liquidity position in excess of $800 million ahead.
Ahead of our expectations.
The success of our working capital initiatives resulted in an inflow for the full year of $270 million ahead of our most recent guidance of $200 million.
During the period, our team responded to customer Destocking in Europe to right size, our finished goods inventory.
Which followed a similar action in the Americas in previous quarters.
This resulted in adjusted operating cash flow of $680 million for the year.
Oliver Graham: For the full year, shipments declined by 2%, with growth in the first half more than offset by the second half deterioration. Consumer demand remains weak given household financial pressures, but the decline in shipments experienced by ourselves and the industry was broad-based and significantly in excess of retail scanner trends in the quarter. We believe this reflected elevated customer destocking into the end of the year. Scanner trends also showed an improvement in consumer volumes towards the end of the quarter, at odds with our shipments experience as customers experienced increased levels of downtime over the holiday period. In the fourth quarter, adjusted EBITDA in Europe decreased by 35% at constant currency to $31 million due to volume mix effects and reduced fixed cost absorption, which offset stronger input cost recovery versus the prior year.
$255 million in the prior year.
Our expectation for 2024 is for further working capital inflow across the full year.
After our usual seasonal outflow in Q1.
P incurred maintenance capex of $112 million.
Both capex of $266 million and growth investment via lease additions of $71 million in 2023.
Total gross investment of $337 million with tightly managed below our initial guidance of just under $400 million Andrew.
<unk> represents a 45% reduction versus the prior year.
Our gross investment program is substantially complete with.
With growth Capex in 2024 to achieve to approximately $100 million, which mainly comprises flexibility enhancements to our network and the final cash place for some of the great projects concluding.
We anticipate a further reduction in growth Capex again in 2025.
Oliver Graham: Reduced production activity as finished goods inventory was right-sized earlier than expected resulted in higher fixed cost under-absorption and a lower margin contribution than expected from the period-end contract asset. We took action on our footprint with the closure of Vicenterm steel lines at the end of the year, and we will continue to keep our network under review to balance supply with demand and improve efficiency. For 2024, we expect low single-digit percent shipments growth with a stronger performance in the second half. Volume growth and improved fixed-cost absorption will drive adjusted EBITDA growth in 2024, but this will be partly offset by competitive pressure on a small portion of our business and some upstream cost increases reflecting elevated energy costs. I'll now briefly hand over to David to talk you through our financial position before finishing with some concluding remarks. Thanks, Lolly. And hello everyone.
I'll, let rich metric ended the year at five five times net debt to adjusted EBITDA.
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Two times in the quarter.
Supported by lower net debt arising from strong cash flow generation.
We anticipate modest deleveraging on a full year basis during 2024, and a more meaningful adoption thereafter.
Note that in addition to our strong liquidity position, we have no near term bond maturities and no maintenance covenants on our bonds.
We have today announced a quarterly ordinary dividend of 10 cents per share to be paid later in March in line with guidance and supported by our robust closing liquidity position.
And the cash generation potential arising from Grace and completing great investments.
There is no change to our capital allocation policy.
With that I'll hand back to Molly.
Thanks, David and before taking questions I will just recap on A&P performance and key messages.
Firstly global shipments grew by 2% in the fourth quarter and by 5% for the full year North America shipments growth was consistently strong and in line with expectations, Brazil shipment trends impacted positively during the second half in Europe shipment trends deteriorated during the second half, but retail scanner data tracked ahead of shipments and would support a more positive market.
David Bourne: We ended the year with a liquidity position in excess of $800 million, ahead of our expectations. The success of our working capital initiatives resulted in an inflow for the full year of $270 million, ahead of our most recent guidance of $200 million. During the period, our team responded to customer de-stocking in Europe to right-size our finished goods inventory, which followed similar action in the Americas in previous quarters. This resulted in an adjusted operating cash flow of $680 million for the year, up from $255 million in the prior year.
Outlook for 2024 in line with historic norms.
In response to challenging market conditions, our team successfully optimized our cash generation through disciplined working capital deployment and inventory rebalancing. We ended the year with a strong liquidity position in excess of expectations.
2023 represented a transition year for A&P, where our team performed at a high level to balance the business.
Continued shipments growth permanent capacity actions focus on operational excellence and tight control of SG&A should all result in stronger adjusted EBITDA generation growth going forward.
Our current view of the market leads us to project global shipment growth of A&P in 2020 for approaching mid single digit percentage full year 2024, adjusted EBITDA is projected to grow by 5% to 10% into a range of $630 million to $660 million.
David Bourne: Our expectation for 2024 is for a further working capital inflow across the full year after our usual seasonal outflow in Q1. He incurred maintenance capex of $112 million, growth capex of $266 million, and growth investment via lease additions of $71 million in 2023. Total growth investment of $337 million was tightly managed below our initial guidance of just under $400 million and represents a 45% reduction versus the prior year. Our growth investment programme is substantially complete, with growth capex in 2024 to reduce to approximately $100 million, which mainly comprises flexibility enhancements to our network and the final cash flow for some of the growth projects that are ending. We anticipate a further reduction in growth capex again in 2025. A leverage metric ended the year at 5.5 times net debt to adjusted EBITDA, falling by 0.2 times in the quarter, supported by lower net debt arising from strong cash flow generation.
Our EBITDA guidance is supported by shipments growth with improved fixed cost absorption accelerated by the completion of finished goods.
<unk> Destocking.
And footprint rationalization.
In terms of guidance for the first quarter adjusted EBITDA is anticipated to be in line with prior year with growth expected in the Americas, but with Europe slightly lower as we remain cautious on production with volume recovery weighted towards the second half.
Having made these opening remarks, we'll now proceed to take any questions that you may have.
Thank you thank.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad.
You are using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again that is star one to ask a question.
We'll pause for just a moment to allow everyone an opportunity to signal.
And we can take our first question.
From George Staphos with Bank of America.
Yes, hi, good morning. This is actually Catherine kilo on for George We had a conflict this morning.
For taking my questions. So I guess first off given we're almost two months into the quarter. Here can you just talk about how youre seeing volumes trending quarter to date at this point across the regions and I guess Relatedly in Europe have you seen any kind of spillover effects related to the Destocking you saw at the end of fourth quarter there.
David Bourne: We anticipate modest leveraging on a full year basis during 2024 and a more meaningful reduction thereafter. Note that, in addition to our strong liquidity position, we have no near-term bond maturities and no maintenance covenants on our bonds. We have today announced our quarterly ordinary dividend of 10 cents per share to be paid later in March in line with guidance and supported by our robust closing liquidity position and the cash generation potential arising from our earnings growth and completing growth investments. There is no change to our capital allocation policy. With that, I'll hand it back to Ollie.
Yeah.
Hello, Yes.
So I think the year has started well and are in all three regions, probably running slightly ahead of our expectations.
There was definitely some transfer from December into January of European volumes. So we had a strong January.
Probably say that two thirds or even more than two thirds of that looks like it is a cross over from December into January.
And region by region, Yeah, you're running ahead of what it would be a guide for the year and we're guiding to low singles.
We're running a bit ahead of that at the moment, but we've got a tough March comp.
Would you be recognizing there's some funny pieces to the days in the quarter with Easter falling at a very early date, but I think in a positive on Europe with.
Oliver Graham: Thanks, David. And before taking questions, I'll just recap AMP's performance in KeyMess. Firstly, global shipments grew by 2% in the fourth quarter and by 5% for the full year. North America's shipment growth was consistently strong and in line with expectations.
With where that started in North America has started strong.
In both January and February running again somewhat ahead of our expectations and the same for Brazil, The Brazil market grew 20% in January as a as a total market, which is obviously very encouraging.
We went at that kind of level.
Oliver Graham: Brazil's shipment trends inflected positively during the second half, and Europe's shipment trends deteriorated during the second half, but retail scanner data tracked ahead of shipments and would support a more positive market outlook for 2024, in line with historic norms. In response to challenging market conditions, our team successfully optimized our cash generation through disciplined working capital deployment and inventory rebalancing. We ended the year with a strong liquidity position in excess of expectations. 2023 represented a transition year for AMP, where our team performed at a high level to balance the business. Our continued shipment growth, permanent capacity actions, focus on operational excellence, and tight control of SG&A should all result in stronger adjusted EBITDA generation going forward. Furthermore, our current view of the market leads us to project global shipment growth for AMP in 2024 approaching a mid-single-digit percentage. Folio 2024 adjusted EBITDA is projected to grow by 5 to 10% into a range of $630 to $660 million.
Because of our customer mix.
In January but February or so looks good. So yeah. We're feeling we're feeling positive about the way the year has started even though obviously it's still early.
Okay understood and then as we think about the EBITDA guide for next year can you just lay out some of the key buckets or puts and takes to help us bridge.
Aside from volume.
And also any further color you can provide on your comment regarding those elevated energy costs as well.
Sure. So I think if you take the top end of our guide.
You'd be looking at somewhere north of $50 million positive on volume.
We'd be looking at or you know again somewhat north of 20 million on cost improvements in our fixed cost absorption operation excellence in SG&A and then you've got a negative on price cost.
Call it mid teens.
To bring you back down to the top end of that guide.
And just on that specific point in time.
Yes, the comment about the elevated energy costs is just.
With some of our upstream suppliers, obviously with deferred a lot of that coming down to us over the last couple of years, but we have had to take some of that into this year. Because obviously a lot of energy is used upstream of us as well as in our own operations and it's been a little bit more difficult to parse that into the market in Europe in the current environment, where the market the beverage can market is.
A little bit looser. So that's why you've got that negative <unk>.
Oliver Graham: Our EBITDA guidance is supported by shipments growth with improved fixed cost absorption, accelerated by the completion of finished goods destocking and footprint rationalization. In terms of guidance for the first quarter, adjusted EBITDA is anticipated to be in line with the prior year, with growth expected in the Americas, but with Europe slightly lower, as we remain cautious on production, with volume recovery weighted towards the second half. Having made these opening remarks, we'll now proceed to take any questions that you may have. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
<unk> and that.
At the bottom end of our guide.
Probably just take a bit of all of those and maybe the volume would be more like 35, maybe a negative 20 on the price cost and a positive 15 also on an.
<unk> costs and other cost pieces so that.
The buckets that formed the range.
Okay, Great I'll turn it over.
Thank you.
We will take our next question from Anthony Pettinari with Citi.
Good morning, This is actually Brian Bird Meyer sitting in <unk>. Thank you for taking the question.
I'm just trying to gauge.
The level of curtailments in 2024 that are implied by your guide it seems like there's still going to be some capacity offline in Europe, and Brazil, I'm not sure if that's accurate and then.
Operator: Again, that is Star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to. And we can take our first question, from George Staphos with Bank of America. Yeah, hi, good morning. This is actually Kashin Keilaran from Georgia.
Assuming you reach your volume growth guidance for this year does that imply no essentially no curtailments as we get into 2025.
No look I think we're still.
Ramping.
Some of our growth investments and we still have efficiency gains as we pursue various operational excellence initiatives, though so I think it's not as simple as that I mean, if we take the year. We think we've got about $4 billion of curtailment across the network globally split relatively evenly between the regions.
George Leon Staphos: We had a conflict this morning. Thanks for taking my question. So I guess first off, you know, given we're almost two months into the quarter here, can you talk about how you're seeing volumes trending, quarter to date, at this point across the regions? And I guess, relatedly, you know, in Europe, have you seen any kind of spillover effects related to the de-stocking you saw at the end of the fourth quarter there? Sure, yeah.
We still we still do have some in North America.
And thats, giving us good runway on the growth that we've got in the business.
Particularly in North America, but we also have high hopes for Brazil, returning into some good level of growth. So we are still taking curtailments and we are obviously keeping under review.
On a more permanent network actions, but at this point nothing further to say on them.
Yeah got it got it thanks for that detail last question for me and then I can turn it over.
Oliver Graham: So I think the year has started well in all three regions, probably running slightly ahead of our expectations. There was definitely some transfer from December into January of European volumes, so we had a strong January, but we'd probably say that two-thirds or even more than two-thirds of that looks like it is a crossover from December into January. Region by region, yeah, Europe running, as I say, ahead of what would be a guide for the year. We're guiding to low singles, so we're running a bit ahead of that at the moment, but we've got a tough March comp, which we recognize, and there are some funny pieces to the days in the quarter with Easter falling at a very early date. But I think, you know, positive on Europe where that started. North America has started strong in both January and February, running again somewhat ahead of our expectations, and the same for Brazil.
Under the impression that the growth Capex in 2024 was kind of related to projects initiated in 'twenty three and it was maybe a little bit of spillover, but the prepared remarks, maybe set otherwise I'm. Just curious if you can disclose the projects that are included or or maybe it's too soon to do that thanks I'll turn it over.
Actually I think 2020 full growth capex as.
Projects that were initiated in 2003, so I think we talked about that half of it being about flexibility.
Enhancements to our North American network together with the changes we needed to make to address the white house closure.
The other half.
We've got some carryover projects from the growth investment there just.
Some of the cash out is in this year.
So most of that is 23, there are some 24 projects that will occur during the second half of the year again focus mainly on small amounts of flexibility improvement.
Oliver Graham: The Brazilian market grew 20% in January as a total market, which is obviously very encouraging. We weren't at that kind of level just because of our customer mix in January, but February also looks good. So yeah, we're feeling positive about the way the year has started, even though obviously it's still early.
In the European network.
Yes, that's the bulk of the <unk>.
The $100 million.
Got it thanks a lot.
Okay.
And our next question will come from Curt Woodworth with UBS.
Yes. Thank you good morning.
I was wondering if you could help bridge.
Bridge, a little bit on free cash flow Delta this year, you're talking about working capital to be a use but then can you also give us some guidance on lease.
Lease expense cash interest in some other line items.
Oliver Graham: Okay, understood. And as we think about the EBITDA guide for next year, can you just lay out some of the key buckets or puts and takes to help us bridge, aside from volume, and also any further color you can provide on your comments regarding those elevated energy costs as well? Sure.
Good.
Rockbridge on free cash flow.
Yes, Hi, cats, yes happy to help say, we think we'll have a small working capital inflow. This year as we as we outlined.
Lease repayments of the order of 90 million.
Maintenance Capex are non business, great investment Capex of the order of 120 <unk>, we will have some operating exceptionals on the closure of our lighthouse advice in some facilities.
Oliver Graham: So I think if you take the top end of our guide, you'd be looking at somewhere north of $50 million positive on volume. And we'd be looking at, you know, again, somewhat north of $20 million on cost improvements, such as fixed cost absorption, operation excellence, and SG&A. And then you've got a negative on price cost, you know, call it mid-teens, to bring you back down to the top end of that guide. And just on that specific point, so yeah, the comment about the elevated energy cost is just with some of our upstream suppliers. Obviously, we've deferred a lot of that coming down to us over the last couple of years, but we have had to take some of that into this year And it's been a little bit more difficult to pass that on to the market in Europe in the current environment where the market, you know, the beverage can market is a little bit looser.
So we will have 30 to 40 <unk> there.
We'll have cash interest.
100 would be my estimate for the year for that one.
Cash tax perhaps of the order of 35.
Okay. Thank you and then I guess in terms of the volume outlook in the Americas.
Can you give a little bit more granular on.
Maybe the assumptions underpinning that like how much of that would be functional around market share win.
Just kind of contractual commitments you have I think you said market growth.
Would it be about 2% and then.
With respect to Europe are there are there any similar.
Levels of.
Growth there in terms of taking share or leveraging new plant network. Thank you guys.
Sure Yeah. So look I think with North America, we guided to mid to high single.
Digit percentage and you probably would take the majors being the contractual gains and the rest being the market. So we see the market in the low single digits.
Oliver Graham: So, that's why you've got that negative 15 in there. At the bottom end of our guide, you'd probably just take a bit off all of those, you know, maybe the volume would be more 35, maybe a negative 20 on the price cost and a positive 15 or so on the operating costs and other cost pieces. So, those are the buckets that form the range. We will take our next question from Anthony Petare with Citi. Yeah, I got it, I got it.
And I think we've commented before that we have a couple of contractual gains going into 2024. So that's broadly how those two would.
Let down and then I think on Europe, it's much it's market growth in our mind.
There was a reasonable amount of ups and downs in our customer base coming into 2024, but the growth that we're seeing in 'twenty four is largely from the market, which we're seeing at about a 2% level as you said.
Okay. Thank you.
Thank you.
And we will take our next question from Richard Taylor with Deutsche Bank.
Oliver Graham: Thanks for that detail. Yeah, last question for me, and then I can turn it over to you, is that I was under the impression that the growth in CapEx in 2024 was kind of related to projects initiated in 23, and there was maybe a little bit of spillover, but the prepared remarks maybe said otherwise. I'm just curious if you can disclose the projects that are included, or maybe it's too soon to do that. Thanks. I'll turn it over to you.
Thank you given the healthy liquidity position at year end and the planned reductions in Capex.
What the business consider using its balance sheet in any way to support the liquidity demands that its majority owner raising the dividend special dividend redemption of the preferred.
Sure I'll take that one.
I think we've been clear capital allocation policy is unchanged.
We look at the current level of dividend is very sustainable.
And the liquidity as you say at year end absolutely supports that.
Yes, it's sustainable dividend current level as our first priority and then leverage reduction is our second loyalty.
Oliver Graham: Actually, I think the 2024 Growth CapEx is projects that were initiated in 23. So I think we talked about about half of it being about flexibility enhancements to our North American network together with the changes we needed to make to address the White House closure. Then the other half, you know, we've got some carryover projects from the growth investment that just, you know, some of the cash out is in this year. So most of that is 23. There are some 24 projects that will occur during the second half of the year, again focused mainly on, you know, small amounts of flexibility improvement in the European network. So yeah, that's the bulk of it. Hi Kurt,
Thank you.
And before we go to our next question.
Just one more reminder to our audience. If you would like to ask a question you may signal by pressing star one.
We'll take our next question from Roger Spitz with Bank of America.
Yeah.
I just wanted to clarify the 2020 for cash interest.
What I heard 100, but.
Okay, I might've misheard.
I think today, yes $200 million.
Yeah, Okay, Okay that makes more sense.
Okay, and so when you do that you get.
Adding all the things you did gave mid point of the range.
Our working capital inflow.
Kind of like a free cash flow before dividends and preferred.
Yes.
$35 million plus or minus.
What have you is that does that kind of the way to think about it putting all those pieces together that you.
Together.
I get to a higher number than that.
Higher number okay.
Alright, thanks very much.
Okay.
And we will take our last question from Ming Yang with Jupiter asset management.
Hi.
Scott.
Hi.
The exceptional costs today, you got it earlier your line toothless stock startup costs or restructuring costs.
How much Moses Lake, adding all together in terms of dose.
David Bourne: Yeah, happy to help. So we think we'll have a small working capital inflow this year, as we outlined. Lease repayments of the order of £90 million, maintenance capex, a non-business growth investment capex of the order of 120. We will have some operating exceptionals on the closure of our White House and Vice Intern facilities, so we will have 30 to 40 there.
And the items below EBITDA.
And as Jim just wanted to come firming that the Capex. The total Capex guidance is at roughly 230 net next year.
Yeah.
Capex cash play is is all of that order, yes in terms of Exceptionals, you have operating exceptionals, which sit before free cash flow. So the cash element may be of the order of 35 around our restructuring activity. You will then have some startup costs that sit below the free cash flow line.
David Bourne: We'll have cash interest, put 200 would be my estimate for the year for that one, and cash tax, perhaps of the order of 30. Okay, thank you. And then, I guess, in terms of the volume outlook in the Americas, it would be about 2%. And then with respect to Europe, are there any similar levels of growth there in terms of taking share or leveraging new plant networks?
They may be of the order of $25 a share, but they are coming down quite substantially obviously from when we were in the middle of our gross investment program.
Thank you I guess my my last question is.
In terms of the cash balance that you have given that Youll know youll have oh, well pressures in Brazil, et cetera et cetera. So what do you see that your business needs includes mainly noncash Berlin to operate.
The minimum cash balance so far we like to have a float of about $100 million would be our absolute minimum.
Yeah, clearly, we're a long way above that at this stage.
Oliver Graham: Thank you, digit percentage. And you probably would take the mid as being the contractual gains and the rest being the market. So we see the market in the low single digits. And I think we've commented before that we have a couple of contractual gains going into 2024. So that's broadly how those two would compare.
Okay understood. Thank you very much.
Okay.
And it appears there are no further questions at this time, Mr. Graham I will turn the conference back to you for any additional or closing remarks.
Thanks, operator, so we had a better than expected Q4 performance in the Americas, which was contracted by some customer destocking in Europe.
We're very confident in a rebound in European volumes, and what has historically been almost stable growth market and my retail scanner trends support a more positive outlook.
Oliver Graham: Thank you. And before we go to our next question, just one more reminder to our audience, if you would like to ask a question, you may signal by pressing star 1. I just wanted to clarify the 2024 cash interest. It's kind of like a free cash flow before dividends and preferred, you know...
As mentioned on the call our year to date volume trends have been positive across each of our markets.
And our actions on our footprint and in addition to anticipated volume growth backed by contracted new volumes in North America should result in improvements in adjusted EBITDA generation in 2024 and beyond.
And we look forward to talking to you all again at our quarter one results. Thank you.
Operator: I get to a higher number than that. This concludes today's call. Thank you for your participation. You may now disconnect.
This concludes today's call. Thank you for your participation you may now disconnect.
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