Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Global beverage shipments grew by 3% in Q2 2024 compared to the previous year.
- Adjusted EBITDA increased by 18%, with strong double-digit growth across both segments.
- AMP raised its full-year adjusted EBITDA guidance range to $640 million to $660 million.
- The company extended a solar power purchase agreement in Germany, covering up to 40% of demand needs.
- All AMP production facilities received ISO 14001 certification, demonstrating best practice environmental management.
Negative Points
- Economic backdrop remains challenging with heightened political uncertainty, ongoing inflation, and pressured consumer spending.
- Revenue in the Americas decreased by 1% in Q2 2024 due to the pass-through of lower input costs.
- Brazil's beverage can shipments declined by 7% in Q2 2024 due to temporary customer mix effects.
- Softer demand in the energy drinks category led to a modest reduction in shipment growth forecasts.
- Net leverage ratio remains high at 5.8 times, though it is expected to reduce to 5.2 times by year-end.
Q & A Highlights
Q: Liquidity improved ahead of your expectations. Can you expand on why you decided to secure that $300 million financing agreement?
A: We wanted to demonstrate the resilience of the business and the strength of our balance sheet, especially after a credit downgrade. This action increases our liquidity to nearly $1 billion by year-end, positioning us well for the next 12-18 months. (Oliver Graham, CEO; David Bourne, CFO)
Q: Can you expand on what you're seeing by category in North America, particularly in energy drinks?
A: We're seeing strength in carbonated soft drinks and sparkling waters. Innovative soft drinks are also performing well. However, the energy drinks category has been weaker than anticipated, likely taking a breath after a couple of strong years. We expect it to return to growth due to ongoing innovation. (Oliver Graham, CEO)
Q: How much of the demand growth in Europe can be attributed to events like the Euro Cup and the Olympics?
A: While these events contribute, the main factors are customers leaning back into volume for revenue growth and the can gaining in the pack mix due to its efficiency and sustainability credentials. We are cautious in our guidance but July is looking strong. (Oliver Graham, CEO)
Q: Can you provide more details on the cost actions you mentioned last quarter?
A: We had improved input cost recovery in the quarter, offsetting what we initially thought might be a pricing headwind in Europe. We also see ongoing improved operating cost performance and anticipate further cost reductions into 2025 and 2026. (Oliver Graham, CEO)
Q: Despite volume declines in Brazil, margins in the Americas were solid. Was there anything on the mix side that helped?
A: Positive mix and better cost performance were significant drivers. Rationalizing our footprint also helped. We had good sales in Brazil, which was positive for margins. July growth looks promising, particularly in North America. (Oliver Graham, CEO)
Q: Are you seeing any signs of political uncertainty affecting demand in North America?
A: We see more economic activity being muted due to efforts to bring down inflation, which puts pressure on consumers. However, we believe revenue growth will continue to be a target for our customers, leaning more on volume. (Oliver Graham, CEO)
Q: Can you provide an update on the previous North American customer volume dispute?
A: We can't give a running commentary but are making progress and remain optimistic about our contractual position. There is no anticipated change to our guidance due to this situation. (Oliver Graham, CEO)
Q: What are your cash interest expectations for 2024 and 2025?
A: For 2024, we expect around $200 million, which won't change due to the new term loan facility. For 2025, we anticipate it to be about $10 million higher. (David Bourne, CFO)
Q: How long do you think the weakness in the energy drinks category will last?
A: It's too early to know definitively. There are some temporary factors like lower footfall in convenience stores. We expect the category to return to growth next year based on historical performance and ongoing innovation. (Oliver Graham, CEO)
Q: Are there any idiosyncratic tailwinds that would drive Ardagh to outperform the market in 2025 and 2026?
A: Not particularly. We expect market growth plus a little bit more, driven by our strong customer relationships and efficient operations. (Oliver Graham, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
