Q1 2024 Ardagh Metal Packaging SA Earnings Call
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Welcome to the art on metal packaging S. A first quarter 2024 results call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Stephen Lyons with Investor Relations. Please go ahead.
Stephen Lyons: Thank you operator and welcome everybody. Thank.
Stephen Lyons: Thank you for joining today for our metal packaging first quarter 2024 earnings call, which follows the earlier publication a M. <unk> earnings release for the first quarter.
Stephen Lyons: I'm joined today by Oliver Graham A&P, as Chief Executive Officer, and David Borde, A&P as Chief Financial Officer.
Stephen Lyons: Before moving to your questions. We will first provide some introductory remarks, right <unk> performance and outlook.
Stephen Lyons: A&P the earnings release and related materials for the first quarter can be found on a M P's website.
Stephen Lyons: Www dot farzana metal packaging dot com.
Stephen Lyons: Marks today will include certain forward looking statements and include use of non Io breast financial measures.
Stephen Lyons: Actual results could vary materially from such statements.
Stephen Lyons: Please review the details of A&P as forward looking statements disclaimer reconciliation non <unk> financial measures to Io, whereas.
Stephen Lyons: Whereas financial measures and A&P the earnings release.
Stephen Lyons: I will now turn the call over to al or Brian.
Steven: Thank you Steven.
al: Our performance in the first quarter was encouraging with good volume growth across each of our markets.
Steven: Beverage shipments grew by 7% in the Codell versus the prior year.
al: And adjusted EBITDA growth was marginally ahead of our guidance due to favorable volume and mix.
Speaker Change: In addition to continued strong shipment growth in the Americas Europe is showing welcome signs of a recovery post customer destocking.
al: Disciplined permanent capacity actions are also taking effect.
al: Along with our expectation for continued volume growth and increased manufacturing activity will improved fixed cost absorption.
al: This gives us confidence to reaffirm our full year adjusted EBITDA guidance with the expectation of higher adjusted EBITDA growth for the remaining quarters.
al: We continue to manage our capacity in a disciplined manner through a mix of curtailment and longer term action is appropriate with.
al: With our well invested global manufacturing base and a strong diverse mix of customer relationships, we remain well placed to benefit from an ongoing recovery in demand, which we expect to drive further earnings growth over the medium term.
al: The Dominion beverage cotton continues to outperform increasing its share of the global beverage packaging mix and also is the package of choice for new market innovation.
al: We believe that we are well placed to benefit from this secular growth story as a pure play out of minions beverage car manufacturer.
al: In light of heightened geopolitical tensions we would also remind investors that we have no operations in either Russia or in the middle East, where well hedged on our energy needs for the current year and input materials are predominantly sourced from our local markets.
al: We continue to progress our sustainability agenda with highlights in the quarter, including an improvement in our CDP score to a minus to climate change.
Speaker Change: Turning now to Anp's first quarter results, we recorded revenue for the first quarter of $1 $1 billion.
al: An increase of 1%, which reflected favorable volume mix and currency effects, largely offset by the pass through to customers of lower medical costs.
al: Adjusted EBITDA of $134 million was up 3% on the prior year.
al: The growth in the Americas ahead of our expectations and partly offset by a decline in Europe in line with our expectations as production activity was talking about relative to shipments Greg.
al: If we look at <unk> results by segment revenue in the Americas in the first quarter increased by 2% to $660 million, which reflected shipments growth, partly offset by the posture of lower input costs.
al: North America shipments grew by 13% for the quarter and we encouraged by the sustained strong growth in shipments into 2024.
al: This reflects our attractive portfolio mix in our pipeline of contracted great, which supports our forecast for shipments in our north American business to grow by mid to high single digit percentage this year versus our estimate of a low single digit percentage growth for the industry.
al: And if we look at the industry overall, we are seeing a steady improvement in the outlook, including an uptick in promotional activity, particularly in soft drinks with the potential for further market growth to come.
al: In Brazil first quarter shipments increased by 4%, reflecting encouraging strength in the domestic beverage can industry, which grew by a mid teens percentage.
al: A&P as lower level of shipments growth reflected customer thinks of that.
al: That makes it backs off to a very strong Q4.
al: We continue to balance our capacity through curtailments about network and we're encouraged by the improved industry trends, which are supported by an improving macroeconomic environment.
al: Adjusted EBITDA in the Americas increased by 12% to $91 million, which represents a record first quarter and was driven by favorable volume mix effects, partly offset by higher anticipated labor costs.
al: We continue to expect shipments in the Americas in the order of mid to mid single digit percentage for 2020 for shipments growth and improved fixed cost absorption will drive strong adjusted EBITDA growth for the remainder of 2024.
al: In Europe first quarter revenue decreased by 4% on a constant currency basis to $491 million compared with the same period in 2023, principally due to the posture of lower input cost to customers.
al: Shipments for the quarter increased by 3% on the prior year as sales volumes recover.
al: The decrease in the fourth quarter, which included customer Destocking.
al: We're encouraged by the improvement in shipments trends the recovery has been broad based across regions and categories, but particularly in the beer segment. There is clearly a shift occurring in customer retail pricing strategies with a greater emphasis on body <unk>.
al: <unk> sentiment into macroeconomic indicators are also showing some improvement.
al: First quarter adjusted EBITDA in Europe decreased by 16% at constant currency to $43 million.
al: We exercise caution around the level of inventory build ahead of the summer season by pacing production.
al: Performance was however sequentially stronger growing by nearly 40% from the fourth quarter.
al: The 'twenty to 'twenty four we continue to expect a low single digit percent shipments Greg as we monitor demand patents into the summer season.
al: Growth and improved fixed cost absorption supported by an increase in production activity will drive adjusted EBITDA growth for the remainder of 2024.
al: I'll now briefly hand over to David to talk you through some of our financial position before finishing with some closing remarks.
David Bourne: So Lee and Hello, everyone.
David Bourne: We ended the quarter with a liquidity position of $329 million cash.
David: Cash outflow in the quarter was lower than our expectation, while reflecting the usual seasonality in working capital with a working capital outflow in the quarter of $423 million.
David: We will continue to focus on working capital efficiencies and our guidance for modest full year working capital net inflow remains unchanged.
David Bourne: Hey, I'm paying a total capex of $62 million in the quarter, including 38 million of growth Capex.
David Bourne: We reiterate our expectation for gross Capex for 'twenty 'twenty four of approximately $100 million mainly.
David Bourne: Mainly comprising flexibility enhancements to our network and final cash flows some of our great projects, including.
David Bourne: And maintenance sustainability and <unk> capex of the order of $120 million in line with our steady long term run rate.
David Bourne: We anticipate a further reduction in growth Capex again in 2025.
David Bourne: Our net leverage metric ended the quarter at six two times net debt to adjusted EBITA, which was better than our expectation.
David Bourne: Rising from improved working capital as shipment growth outpaced production, which slowed inventory build ahead of the summer season.
David Bourne: As previously indicated we anticipate modest deleveraging on a full year basis during 2024, and a more meaningful reduction thereafter.
David Bourne: We know they said in addition to our strong liquidity position, we have no near term bond maturities and no maintenance covenants on our bonds.
David Bourne: We have today announced a quarterly ordinary dividend of 10 cents per share to be paid in June in line with guidance.
David Bourne: There is no change to our capital allocation policy.
David Bourne: MP operates with a standalone capital structure, which is structurally unbelievably set puts a basketball Dol Creek are 76% long term majority shareholder.
David Bourne: On the 15th of April Although group announced a new senior secured credit facility with a poly clinics.
David Bourne: Principally to enable the refinancing of its 2025 maturities.
David Bourne: The details of that facility is set out in our doctor groups filings.
David Bourne: The facility is secured on all material asset subsidiary all of our investment holdings, including our pledge on the equity interest in A&P.
David Bourne: Both ordinary and preferred equity.
David Bourne: The financing is entirely so.
David Bourne: The perimeter of A&P and as such does not impose any obligations all covenants on all of our metro packaging SA or subsidiaries.
Speaker Change: With that I'll hand back to all.
Speaker Change: Thanks, David.
Speaker Change: Maybe you can take your questions I will just recap on <unk> performance and key messages for the quarter.
Speaker Change: Global shipments grew by 7% and Americas shipments grew by 11% a third consecutive quarter of double digit growth.
Speaker Change: In your experience a good rebound growing by 3%.
Speaker Change: Adjusted EBITDA growth was modestly ahead of guidance due to favorable volume and mix and this encouraging start to the year gives us confidence to reaffirm our full year 2024, adjusted EBITDA guidance for growth of 5% to 10% into a range of $630 million to $660 million supported by global shipments growth approaching the mid single digits.
Speaker Change: Tentage and as David said in terms about our group's recent financing actions. We can confirm that there are no changes to A&P as capital allocation policies or how we manage our day to day operations.
Speaker Change: Our EBITDA guidance is supported by shipments growth and improved fixed cost absorption accelerated by footprint rationalization and pacing production more in line with sales growth through the summer season, we expect higher adjusted EBITDA guide for the remaining quarters of this year.
Speaker Change: In terms of guidance for the second quarter adjusted EBITDA is anticipated to be in the order of $170 million with growth across both geographic segments and compares with the prior year adjusted EBITDA of $151 million on both a reported and constant currency basis.
Speaker Change: Having made these opening remarks, we'll accuracy take any questions that you might have.
Speaker Change: Thank you.
Speaker Change: I would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Please limit yourself to one question and one follow up question again press Star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal.
Speaker Change: And we can go ahead and take our first question from Anthony Pettinari with Citi what is it.
Anthony James Pettinari: Hi, good morning.
Anthony James Pettinari:
Anthony James Pettinari: Performed better than Hey, you performed better than expected in Europe, and you know understanding you don't give quarterly guidance, but.
Anthony James Pettinari: When would you expect EBITDA could be up year over year in Europe is that is it possible that we see that into Q4 or is it more likely that that's something that happens in the second half or just any kind of thoughts there.
Speaker Change: Yeah, I think we would start to see it in Q2 and would expect through the year. So yeah, I think Europe as you say has performed.
Speaker Change: Slightly ahead of expectations on the volume side, but we did as we mentioned in the remarks paste production back relative to shipments growth since about healthy EBITDA growth back in Q1, but if those trends continue on the volume side again as we mentioned then we can pace up production in line with those improved trends and that should give us a tailwind.
Speaker Change: And the remainder of the year. So we would expect Q2 I think profit growth roughly keys. So you will get to a line ball on a kind of LTM basis, nine Q3 onwards progression.
Speaker Change: Geographies and you know understanding it's hard to kind of measure quarter to quarter do you think your.
Speaker Change: Customers customers are maybe outperforming the market or are you gaining some share you share stable, losing how would you characterize that.
Speaker Change: Yeah, it's hard to say at this point among our peers I mean anyone has reported any numbers and this is very strong.
Speaker Change: But obviously until we see all of them are not quite sure where we are I'm sure I think we think we'd be roughly at the market rate and that's usually where we are we have strong positions across.
Speaker Change: Particularly northern European markets, and we are also very diversified between different categories and geography. So so it's probably a reasonable estimate of the market.
Speaker Change: I think that we certainly see the betas that are recovering strongly compared to last year, a much more focus on volume relative to price and we see that again much more broadly across the customer base, whereas last year that were clear winners and losers, depending on their pricing strategies, but we have strength in other categories as well we have.
Speaker Change: Ranked in soft drinks, particularly the U K, we have strength in the energy sector.
Speaker Change: So it's certainly not only one area and that's what's I think encouraging and.
Speaker Change: And as I mentioned in the remarks April is also looking strong obviously, we get the benefit the Easter fell into March which for US means additional shipping days in April.
Speaker Change: Nevertheless April trends are also very encouraging.
Speaker Change: Okay. That's very helpful I'll turn it over.
Anthony James Pettinari: Thanks Anthony.
Speaker Change: We will take our next question from Mike Rock Flynn with <unk> Securities.
Speaker Change: Alright, Thank you David and Stephen for taking my question and congrats on a good quarter overall.
Speaker Change: Thanks, Mike.
Speaker Change: Wanted to follow up on your comments on April and the positive volume trends have persisted can you just is there any way to quantify.
Speaker Change: In terms of volumes for April.
Mike: So I think the trends have largely continued so you're starting to see the sort of growth rates that we experienced in Q1 in Americas continuing into them into April and then Europe. It's it's similar or tick up actually because again I mentioned this extra couple of days shipping.
Mike: And so you've probably got a point to two if you look at the year to date number by the end of April.
Mike: On our quarter one performance. So yeah. We're encouraged by that obviously, we all had the experience last year in Europe, but we had some decent months going into the summer and then had a pretty full H. Two so that's why we're not shifting any guidance so leaving any projections at this point, but certainly compared to where we were in Jan said, we've been incurred.
Mike: But the trends in Europe, which was the main area for area of risk between the top and bottom of our guidance.
Speaker Change: Got it and then just follow up on Europe.
Speaker Change: You can point to that gives you confidence that Europe has reached this positive inflection point and that it will maintain the trend that it's truly on and then just quickly as well any update on the recovery of the year of European imports inputs. So that so I think you'd mentioned about $50 million of under recovered.
Speaker Change: Previous your energy costs. If Europe continues on this trajectory will you be able to recover more or that $50 million.
Speaker Change: Yeah.
Speaker Change: No good question.
Speaker Change: So I think that what what is clear is we.
Speaker Change: He said is that our customers are pushing more on volume than price than this time last year and one of the big Bad players I think just reported.
Speaker Change: Articulated that very clearly and we see that across the market.
Speaker Change: So I think last year that had been a big input costs rising today, it costs going into 'twenty, three that they've put into the market largely not everybody, but largely.
Speaker Change: And this year inflation is clearly moderating.
Speaker Change: And there is this focus on additional promotional activity or just.
Speaker Change: Controlling.
Speaker Change: On the shelf. So so I think that's the core reason, we do see some recovery in consumer sentiments and macroeconomic indicators in Europe in the last weeks. So there is some encouragement that I think the economy is still highly competitive in the substrate mix.
Speaker Change: With everything that's going on with energy in Europe, and also the sustainability trend. So I think we have the tailwind from that position. So I think if you add it all together.
Speaker Change: Yes, it's shaping up it's shaping up well for the year. Obviously, we have the football championships, we see quite a lot of labels and activity around that and so that is also providing a bit of a tailwind.
Speaker Change: I think to your second question, it's not a direct read through from increased volumes to dealing with the price cost issues in the energy pass through but we are starting to see some encouraging signs that we may find offsetting cost actions and we will certainly be able to update on that at the.
Speaker Change: Q2 results.
Speaker Change: Got it good luck in the quarter. Thank you.
Speaker Change: That's right.
Speaker Change: Thank you. Our next question will come from George Staphos with Bank of America.
George Leon Staphos: Hi, everyone. Good morning, Thanks for the details.
George Leon Staphos: I'll, let David quick question for you on aluminum.
George Leon Staphos: We have these new trade sanctions on aluminum.
George Leon Staphos: Hopefully, it's not an issue, but how should we think about art I imagine through this.
George Leon Staphos: Why should it not be an issue what are you doing to pledge supply chain what are the risks.
Speaker Change: I had a quick follow on.
David: Sure George.
Speaker Change: We're not seeing any material risks on that front at this point obviously.
Speaker Change: The cost pass through we did have some.
Speaker Change: Timing effects, when we had very high raw materials inventories when the sales slowed in 'twenty, two and let me it's spiked.
Speaker Change: But a raw material inventory is much lower now and B, we have some additional hedging procedures in place for that so we don't see a particular is there I think our assessment is that.
Speaker Change: That situation will work its way through.
Speaker Change: In terms of supply getting into the market. So yes. So at this point and I never say never but.
Speaker Change: No particular concerns on that front.
Speaker Change: Just a quick one on that just what are your suppliers, saying about if because you have some of this inventory piling up in the warehouses, but can't be necessarily used and so and this isn't specific to argue this is more of a man.
Speaker Change: Industry question right.
Speaker Change: But if you have some sort of production outage had a Chris elsewhere, then all of a sudden there is maybe some inability for suppliers to meet demand. What are your what are your suppliers, saying about their ability to meet you. If there's some sort of meet your demand if there's some sort of outage or some other issue that arises and then my my second question would be just.
Speaker Change: You mentioned.
Speaker Change: Higher labor cost was one and one of the headwinds in the quarter and I've talked about this before but can you remind us what's going on there how youre managing it and what are the offsets. Thank you.
Speaker Change: So no I mean to be honest, our suppliers not raising any concerns at this point about supply will continue to have supply and particularly in Europe. We have had some issues with supply in North America more because of.
Speaker Change: The mill outages, but again I think the team has managed through those extremely well so yes, the minute, Georgia, nothing particular being raised with us on on any continuity of supply issues on aluminium.
Speaker Change: And then sorry, I forgot your second question.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes that was just the normal obviously.
Speaker Change: Did get quite a bit of labor inflation coming into the year is real wages caught up with inflation, but PPI mechanisms.
Speaker Change: And other pass through mechanisms have dealt with that very well, particularly in North America and.
Speaker Change: South America and effectively in Europe, given that the issue. We faced was on the energy side too. So yeah, I think we called it out because it is the notable bridging item, but not because we didn't anticipate it will cover most of it in in our pricing actions.
Speaker Change: Okay.
Speaker Change: Thanks Ali.
Ali: Thanks Joseph.
Speaker Change: Thank you. Our next question will come from Pamela Kaufman with Morgan Stanley.
Speaker Change: Hello, This is actually Stefan sitting in for Pam. Thanks for taking my question.
Stefan: Let's say promotional levels continue to improve and scanner and you mentioned it earlier on the call how much visibility into customer promotions do you have how do you see this progressing.
Stefan: The balance of 2024.
Speaker Change: I think in North America, we get quite good data on promo activity and we certainly can disaggregate that by category.
Stefan: What you've seen is as mentioned in the remarks is that soft drinks promotions are definitely improving in a sense. They are more of them.
Stefan: Getting closer to historic levels, you see that pay a promotion that definitely sluggish relative to prior years and that can be explained by some of the dynamics and following.
Stefan: Bud light incident last year, so I think.
Stefan: We're obviously more exposed to the soft drink side of the house and therefore, we've been encouraged by that progression in soft drinks promotions.
Speaker Change: Thanks for the color and then maybe can you dig into the consumer dynamic a bit in Brazil.
Stefan: And maybe what youre seeing in terms of potential substrate shift.
Stefan: Back to cans from returnable glass.
Speaker Change: Yes, so I mean, the industry grew 16% in Q1 and the leader in the industry, which is the main player in returnable glass grew over 20% in Q1. So I think you can safely say that theres no trend into returnable glass and the expected reversion in Kansas is happening.
Stefan: And so I think.
Stefan: Not surprising I think that it's a long term trend out of return them into one way packaging I think now that the cost of one way packaging in terms of Ele me and conversion costs metal dollar price costs have stabilized and therefore, the inflation in the Canada is reduced.
Stefan: We see the move back into one way packaging.
Stefan: We anticipated so yeah, we're encouraged by that the consumers, obviously still very price sensitive. So we certainly see you got four or five big Brewers down there and you certainly see quite big swings in volumes between them, depending on their retail pricing strategies and we saw that in Q1.
Stefan: All makes one of our customers going early with price.
Stefan: And therefore, reducing volume, but otherwise I think the industry and a very healthy place actually.
Speaker Change: Thanks for the color I'll turn it over.
Speaker Change: Thanks Stephan.
Speaker Change: Thank you.
Speaker Change: And our next question will come from Curt Woodworth with UBS.
Curtis Woodworth: Yes, hi, Alan and team Thanks for taking my question.
Curtis Woodworth: I was hoping you could frame out maybe some of your expectations for EBITDA in Europe. This year and I noted in the past you talked about some increased net price headwinds for some of the short cycle I think small German brewers that you were expecting.
Curtis Woodworth: To hurt you, but then the flip side it seems like Youre seeing better operating leverage in the model and then you have some fixed cost take out from the German steel closures.
Curtis Woodworth: How do you see some of those moving pieces and could you just frame out what you think EBITDA.
Curtis Woodworth: For Europe could look like this year on year on year basis.
Speaker Change: Yeah look at it.
Curtis Woodworth: At the top end of the guide.
Curtis Woodworth: Europe was about a third of the of the gain.
Curtis Woodworth: So the guide is give or take 60.
Curtis Woodworth: And Europe was let's say roughly a third of that game.
Curtis Woodworth: And that was heavily cost driven from.
Curtis Woodworth: From actions taken around our operating costs.
Curtis Woodworth: Position in growing into.
Curtis Woodworth: Fixed costs and then there was some volume growth obviously.
Curtis Woodworth: But as you said, we called out at the beginning of the year that there were some offsets in terms of LNG posture.
Curtis Woodworth: Due to the increased price competitiveness of the market, which I think that you've seen in other results have come to market.
Curtis Woodworth: So as you know.
Curtis Woodworth: Mike's question at the top of the call do we see any improvement in that way or we could I think certainly and we feel we've derisked the lower end of the guide a bit but we're not changing it at this point until we come through the summer, but I think.
Curtis Woodworth: With that positive Q1, and the way trends going into April.
Curtis Woodworth: Could see some some improvement there and we have also got some.
Curtis Woodworth: Possible actions that we can take around the cost side that could offset some of that price cost leakage as well. So at this point, we're not changing anything in terms of guidance, but I think Q2 will have a much better read on.
Curtis Woodworth: Whether we see the summer season, having played out well and therefore, whether some of these positive trends that we're seeing at the moment again play out into the full year.
Speaker Change: Okay, and then with respect to get back to the aluminum question on.
Speaker Change: You called out a metal cost in a drag of roughly 13 million and I was wondering could you see a reversal of that headwind given you're continuing to right size inventories and I assume that.
Speaker Change: Has cheaper metal units relative to you know what your pass through mechanisms would allow for.
Speaker Change: On a revenue basis today.
Speaker Change: No.
Curtis Woodworth: The other way around right, which is whatever we bought four and inventory is what we sell for us.
Speaker Change: Yeah, I don't think that's going to help us.
Speaker Change: I think the shortening of our working capital cycle relative to the last time, we had it will mean that we are much more in sync with the time of purchase speed the time of sale.
Speaker Change: <unk>, which was contractually has round about six weeks between between those two elements to make sure the price evens out and say now that we're back on a more normal working capital cycle and with whereas having destock.
Speaker Change: If you look at the comparison for Q1, 'twenty three you'll see our inventory balance sheets down by almost $120 million from last year.
Speaker Change: You'll see we've got a lot less risk there going forwards.
Speaker Change: Understood. Thank you.
Speaker Change: Thanks.
Speaker Change: Next question will come from.
Arun Shankar Viswanathan: Arun Viswanathan.
Arun Shankar Viswanathan: With RBC capital markets.
Arun Shankar Viswanathan: Great. Thanks for taking my question and congrats on the solid results.
Arun Shankar Viswanathan: Im just curious about some of the volume growth that you saw in the quarter and what you're kind of expecting over the next few quarters. So in North America.
Arun Shankar Viswanathan: Do you expect to kind of remain in that pretty elevated level I say, 13%.
Arun Shankar Viswanathan: Our double digit volume growth and if so is that being driven by an increased promotional activity level.
Arun Shankar Viswanathan: Or is it mainly.
Arun Shankar Viswanathan: I guess comp driven and then secondly in Europe now this is a.
Arun Shankar Viswanathan: Again, a pretty decent recovery from some some weaker results last year.
Arun Shankar Viswanathan: Do you think that this is sustainable.
Arun Shankar Viswanathan: What do you really think is driving it just given that where we are still seeing some relatively muted consumer trends and demand growth over there. Thanks.
Arun Shankar Viswanathan: Yeah.
Arun Shankar Viswanathan: So again on Europe, I think two or three things driving it I think.
Arun Shankar Viswanathan: Our customers clearly leaning into volume relative to price compared to last year, whereas a number of big customers, particularly on the beta side went very heavy on price and therefore, we lost a lot of volume.
Arun Shankar Viswanathan: On that strategy, and therefore increased volumes from increased promotions or better.
Arun Shankar Viswanathan: Pricing at the shelf I think we are very competitive at the moment as I can in Europe in the substrate mix with the energy cost impacts on other substrates and also the sustainability issues on other substrate sales I think we're clearly winning in the mix and though although I agree.
Arun Shankar Viswanathan: It's not that the economies are doing particularly well, but they are doing a bit better than anticipated. So I think <unk> got all three factors uncertainty retailers have been pushing hard on getting back to that value for money propositions in Europe. So that will gives us encouragement that these trends can be sustained.
Arun Shankar Viswanathan: We could see Q2, it tick up a tick or two up on Q1 as these trends continue in Europe and then.
Arun Shankar Viswanathan: We're not predicting anything different than our full year guidance for the rest of the year at this point North America I think it will be down a little bit in Q2 on Q1, just because we had some very strong comps in Q2 last year. So we don't anticipate these levels through Q2, three and I think our guide is mid to high.
Arun Shankar Viswanathan: Singles for the year, So I think.
Arun Shankar Viswanathan: Comfortable with that scale and then Brazil is also.
Arun Shankar Viswanathan: <unk>.
Arun Shankar Viswanathan: Not going to have such a necessarily structure strong quarter hard to call in Brazil, because things are pretty volatile depending on the retail pricing environment, but so I think <unk>.
Arun Shankar Viswanathan: <unk> will still be very solid through Q2, and the rest of the year as we've given in our guide, but maybe not quite at the level of Q1, the trends they were pretty encouraging in both markets.
Arun Shankar Viswanathan: <unk>.
Arun Shankar Viswanathan: We see good growth still in energy.
Arun Shankar Viswanathan: In the U S CSD pretty good pretty good, particularly in cans sparkling water have been very strong in Q1 and actually we've had good growth on the sort of seltzer F&B side of the house as well in North America, which is encouraging and in Brazil as I mentioned, the whole industry up 16%. So we've clearly got pack mix shift coming back.
Arun Shankar Viswanathan: To Ken so lots of positive trends I think to support our full year guide.
Speaker Change: Great. Thanks for that and just as a follow up.
Speaker Change: It sounds like maybe you could can you characterize the utilization rates in those regions.
Speaker Change: Implications for pricing I don't know.
Speaker Change: Not sure of contracts or maybe coming up for renewal and 25% 27 or how would you.
Speaker Change: Characterized.
Speaker Change: From a rate environment across those regions and potential for continued kind of.
Speaker Change: Good price negotiations thanks.
Speaker Change: Yeah, No I mean, we're way.
Speaker Change: Did more 'twenty six 'twenty 725.
Speaker Change: Particularly in North America.
Speaker Change: So nothing strongly happening right now but I.
Speaker Change: I think we said low nineties with where we think the industry is and where we are in Europe, and North America, nothing particular to change that yes, obviously, we need to see how payers report out to understand the overall key one picture.
Speaker Change: But so we assume are roughly in that sort of space and I think we'd reiterate the messages. We gave in February which is we're not seeing anything to concern is on.
Speaker Change: On a big scale in either market.
Speaker Change: The pricing, we definitely did see some increased activity on pricing with regional customers in particular in Europe in the back half of last year. When we went into the budget and planning season with some softness in the market, but if we take it at the macro level, we're not seeing anything to concern us in terms of the contract the reconstructing thats going to go on between 2010.
Speaker Change: 5% in 2027.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: Thanks, so much.
Speaker Change: And our next question will come from Ming Yang with Jupiter asset management.
Ning Yang: Hi could you provide some quantitative guidance on your expectation of cash interest cash tax.
Ning Yang: Ordinary cost below the adjusted EBITDA line.
Ning Yang: And also just wanted to confirm you said that your gross.
Ning Yang: Capex for next year for 2025 will be even lower than 2004.
Ning Yang: Well you know it would be like roughly half of kind of.
Ning Yang: 'twenty four capex will be okay with Roth estimate.
Ning Yang: And it did confirm that the dividend.
Ning Yang: Policy is unchanged. So do you expect to have this dividend policy for the medium to long term.
Ning Yang: Next to three to five years and.
Ning Yang: Or or or that that dividend policies. Many four.
Ning Yang: In respect of 24.
Speaker Change: Thank you.
Ning Yang: Hi.
Speaker Change: Thanks for your questions, let type I've captured the moment right.
Speaker Change: That's somewhat backwards say no change to our capital allocation.
Speaker Change: Strategy side, our dividend policy is exactly as it has been going on of course, we just announced the 10 per quarter.
Speaker Change: Board will determine if the policy going forward every quarter there is no anticipation of.
Speaker Change: Any change there from our perspective say.
Speaker Change: Guidance, I'm, obviously, not going to comment on three years out at this stage in seating.
Speaker Change: In terms of Capex I think you're Directionally right. So we've said that we will.
Speaker Change: Currently have a reduction in growth Capex next year could it be of the order of half what we're projecting for HCA, Yeah, I think thats not far.
Speaker Change: Some pain.
Speaker Change: Sure.
Speaker Change:
Speaker Change: And then lastly in terms of cash flow guidance I think our tax rate guidance is largely unchanged from the guidance. We gave in February and I think cut today.
Speaker Change: A relatively comprehensive cash flow.
Speaker Change: Point in time.
Speaker Change: So we said, yes, working capital will pay a modest didn't play maybe a deal with.
Speaker Change: 40 to 50 million.
Speaker Change: Maintenance capex around about 120, Mark as I've said in my remarks.
Speaker Change: Could you just elaborate a little bit more as to why why you've done that and then also could you tell us what the.
Speaker Change: Chris Hi, say, yes, it is quite normal for us to draw down the asset backed loan facility at this point in the year for lesser working capital low point.
Speaker Change: And therefore.
Chris: The facility is aimed to help the seasonality of our business. That's the purpose of it being that site.
Speaker Change: Q1 is our traditional touch draw down on this and if you look at a comparative last year Youll see the same.
Speaker Change: The interest rates on it.
Speaker Change: Is about five 9% something of that.
Speaker Change: Great. Thank you very much.
Speaker Change: And before we take our next question as a reminder to our audience. If you would like to ask a question you May press star one on your telephone keypad.
Speaker Change: Our next question will come from Paul <unk> with.
Paul: BNP Paribas.
Paul: And.
Paul: Paul You May begin your line is open.
Speaker Change: And Paul I do apologize I am still having a hard time hearing.
Paul: Can you.
Speaker Change: We are going to go ahead and take another question from Chris Lang with Federated or Mezz.
Speaker Change: Can you hear me.
Chris Lang: Each signal and hopefully we can get to your question.
Chris Lang: Chris You May begin hey, guys, sorry, just one.
Chris Lang: Thank you Chase so just actually another another question.
Apollo: Apollo is back on I think I'm quoting here all material assets of N I M B P.
Chris Lang: Could you give us a little bit more color as to exactly what material assets, meaning does it does it mean, a 100% of that.
Chris Lang: Restricts it correct or are there some.
Chris Lang: Small carve outs here and that we should be aware of.
Speaker Change: Thanks, Chris.
Speaker Change: Relatively simple it's a pledge on the equity base be a third in the ordinary equity.
Speaker Change: A I H S holds in the business, which is the entire stake at our crude holds holds in that say I didn't know when they called out some of that but just to be clear on the expertise.
Speaker Change: Directly on A&P assets.
Speaker Change: Understood. Thank you very much.
Speaker Change: All right, we are going to attempt to hear from Mr. Sumit hour again with BNP Paribas.
Sumit: Paul you may begin.
Sumit: Hi, Thanks, so much for taking my questions.
Sumit: First I just wanted to ask on the amped up dividend cannot financing from Apollo at IHS prevent that dividend going to the Oregon restricted group.
Sumit: Then just want to reconfirm that hurts R&D part of the equity pledge and that transaction. Thank you.
Speaker Change: Yes, so I think the second one we can confirm that and then in terms of dividend obviously dividend policy is an A&P board matter, but any questions on sort of what happens to it then I think the best directed on the HSA called the A&P Board will decide what dividend we pay.
Speaker Change: And at the moment as we said, we're just reaffirming our current dividend policy.
Speaker Change: Okay. Thank you so much.
Speaker Change: And we can take our next question from Gabriel <unk> with Wells Fargo Securities.
Speaker Change: Oliver David.
Gabriel: Stephen Good morning.
Gabriel: Afternoon, I guess.
Gabriel: One quick one I think you talked about maybe coming out of 2023 with about 60 or $70 million or so of trapped.
Speaker Change: Fixed overhead under absorption.
Gabriel: Just can you confirm that number for us.
Gabriel: If we kind of continue at the pace and hit the.
Gabriel: Mid single digit blended.
Gabriel: In 'twenty for what that number could look like going into 'twenty five.
Gabriel: And then any other.
Speaker Change: I guess.
Speaker Change: Non volume related price cost items that we should be thinking about that are hitting this year that.
Speaker Change: Our abnormal pattern if you will thank you.
Speaker Change #100: Thanks, Scott Yeah look on the second I think nothing that we didn't already signal.
Speaker Change: And the thing as I said I think by Q2, we might have found some offsetting cost improvement to some of those price volume effects that we mentioned in the Q4 results and put as I mentioned in our guide.
Speaker Change: Obviously were not fully company knows yet so we'll wait till Q2, and then I think on your.
Speaker Change: First question on the the drag we think is probably of the order of about $40 million.
Speaker Change: Exiting the year.
Speaker Change: With the closures taking effect. So we'll have the full year effected the closures by then.
Speaker Change: And also hopefully.
Speaker Change: Instead of capacity as per our guidance.
Speaker Change: Okay, perfect and last one and I apologize I think.
Speaker Change: Relatively.
Speaker Change: This morning, but mentions of a new Bev can plant actually starting up here.
Speaker Change: In the northeast.
Speaker Change: Okay, Jay can I'm curious if you've heard anything about it from your customers.
Jay: Yes, I think that's the one we did know about.
Jay: So I think we knew about that one.
Speaker Change: I mean overall.
Speaker Change: Experience of the U S market at the moment is the <unk>.
Speaker Change: They're a good operator.
Speaker Change: Smaller players and the independents are still.
Speaker Change: Looking a bit in the market with the <unk>.
Speaker Change: Obviously, there is some capacity.
Speaker Change: So operationally.
Speaker Change: Some of those situations are being difficult even for one of the bigger players come into the market. So.
Speaker Change: I don't think we have any new reaction to that I think what we can see in the market is.
Speaker Change: Decent growth.
Speaker Change: In certain segments, we've got good growth and we've got confidence I think the growth is going to resume as pricing normalizes and we stop having with some of the shocks that we've had the last couple of years. So yes.
Speaker Change: Yes.
Speaker Change: I'm not too concerned about.
Speaker Change: Other parties in the North American market at this point.
Speaker Change: Understood I mean, we tend to agree with you on the on demand. So what we're seeing on the promo activity. Thank you and good luck.
Speaker Change #104: Thanks Scott.
Speaker Change: And our last question will come from George Staphos with Bank of America.
George Leon Staphos: Alright, thanks for taking the follow on.
George Leon Staphos: To the extent that you can comment on sort of a live mic presentation gentlemen are there any innovations in terms of can.
George Leon Staphos: Offerings that will mean, some meaningful changes to tooling any sort of capex or not.
George Leon Staphos: Next couple of years, but three or four years out now from our vantage point.
George Leon Staphos: After we've moved to trim cans, we had the mini cans back five seven years ago, there hasnt been.
George Leon Staphos: Ton of innovation in the can market.
George Leon Staphos: Maybe you disagree with that but anything that we should be mindful of ultimately in terms of what it might mean for you in terms of tooling and Capex not this year next year, but a few years down the road second question.
George Leon Staphos: A couple of times on some of the other calls and I just wanted to raise it with you.
George Leon Staphos: Could you update us on your view.
George Leon Staphos: On carbon footprint, specifically pvt versus aluminum, especially if we're comparing versus recycled aluminum within beverage packaging. If you had any data on that or any thoughts that would be great. Thank you and good luck in the quarter.
George Leon Staphos: Thanks George.
George Leon Staphos: I think it's a fair comment to say that we've not had huge innovation has led to big capex in the industry in recent years as you say most of the innovation has been around different sizes.
George Leon Staphos: Our improved decoration or improve.
George Leon Staphos: Now lets in materials and quite a lot of obviously process innovation in terms of speed of lines and therefore cost performance.
George Leon Staphos: We've commented before that we think we're close ability.
George Leon Staphos: <unk> remains a need in the industry to really get into some.
George Leon Staphos: Some categories like sports drinks and other hydration categories.
George Leon Staphos: And with that in the investigating that closely there.
George Leon Staphos: The innovations around the end.
George Leon Staphos: Which could also be interesting in terms of different types of end and then the big driver. That's coming now is the increased sustainability of the package and that is also driving a lot of innovation around the end because of the increased the difficulty of using recycled content in the current.
George Leon Staphos: Using the end so the so called Union alloy.
George Leon Staphos: To try and get to a high recycle percentage for the overall package.
George Leon Staphos: In terms of Capex I mean, we closed ability could involve capex on our side of the house. The big goal of course is to get it to not involve capex at the filler.
George Leon Staphos: And innovations could invoke capex both sides.
George Leon Staphos: Suddenly juniata, depending on whether you have to up gauge in haptic.
George Leon Staphos: Material could also lead to some change your comments, but none of these are very major so I certainly wouldn't be modeling any major capital requirements for the industry in the next few years off the back of these I think arrow at the margin relative to building new lines or new campaigns.
George Leon Staphos: But all interesting and I think.
George Leon Staphos: We will continue to support the Cairns growth in a world where the sustainability credentials.
George Leon Staphos: Into new spaces.
George Leon Staphos: And also delivering for our customers in terms of them delivering on their commitments and that takes us to your second question about <unk>. So the main thing I think to note. There is we've got a very interesting journey ahead of us in terms of decarbonization with things like Union alloy with the decarbonization of the upstream grid with the increased recycling.
George Leon Staphos: And therefore increased recycled content. So we can move a long way from today in terms of decarbonization, but also we can see in some of the studies that are done that when we get to those.
George Leon Staphos: Types of recycling rates that you see in deposit countries like 95, plus 99 in Germany, and you get high recycled content levels. Then we can certainly match any package for carbon footprint and then we've got plenty of room to go from there.
George Leon Staphos: We're going to see over the next 10 15 years very material progress by the Ken.
George Leon Staphos: It's already standing in a very strong position on sustainability.
Speaker Change #105: Thanks, so much Alan I'll turn it over.
George Leon Staphos: Sure.
Speaker Change #101: 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.
Speaker Change #103: Thank you.
Alan: Thanks, everybody for joining the call today, so obviously as we said.
Graham: Q1 was ahead of expectations. We are encouraged by what we're seeing in the market shipment growth in and the way that has progressed into April and with the actions that we've taken and I think thats, giving us the confidence to reaffirm full year guidance and also see higher adjusted EBITDA growth for the remaining quarters of the year. So we look forward very much to talking.
Alan: To put our Q2 results in July thanks, very much.
Alan: Yeah.
Alan: [music].
Alan: Okay.
Alan: Okay.
Alan: [music].
Alan: Okay.
Alan: [music].
Alan: Okay.
Alan: [music].