Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Verallia (VRLAF, Financial) has successfully launched its Air Range, a lightweight glass product line, achieving strong customer recognition and industry awards.
- The company is making significant strides in decarbonization with the implementation of an electrical furnace, reducing CO2 emissions by 60%.
- Verallia (VRLAF) reported a positive organic volume growth in Q3, driven by strong performance in Latin America and the beer segment in Europe.
- The acquisition of Vidrala Italy has contributed positively to the company's Q3 results, enhancing its market position.
- The company maintains a strong focus on cost discipline and cash management, achieving a 2.9% reduction in cash production costs through its productivity action plan.
Negative Points
- Verallia (VRLAF) experienced a 6.6% year-over-year decline in Q3 revenue, with a 4.7% decrease in organic growth.
- The company faces a challenging market environment in Europe, with soft consumption and ongoing destocking in premium and export-oriented segments.
- There is a negative price/mix impact, particularly in Europe, due to lower selling prices and adverse geopolitical conditions.
- Verallia (VRLAF) reported an increase in net debt, with leverage rising to 2.3 times by the end of September, compared to 1.9 in June.
- The company anticipates a slightly negative full-year volume compared to 2023, reflecting a slow market recovery.
Q & A Highlights
Q: Can you provide insights on the destocking situation in Europe and when it might end?
A: Patrice Lucas, CEO: In Europe, destocking is ending for fast-moving products like non-alcoholic beverages. However, for export-oriented segments such as spirits and wines, destocking is still ongoing. We expect this to continue into early 2025, but we are closely monitoring the situation.
Q: What are the expectations for the price/cost spread and EBITDA in 2025?
A: Patrice Lucas, CEO: We anticipate a recovery in volumes and a normalization of pricing in 2025. The major impact will be from the carryover of 2024 pricing adjustments. We expect to return to standard industry pricing practices as inflation stabilizes.
Q: How do you plan to achieve the EBITDA guidance for 2024, given the need for significant growth in Q4?
A: Nathalie Delbreuve, CFO: We aim to be around the 2022 EBITDA level. Q4 last year was weak, and we have additional contributions from acquisitions and capacity expansions. We expect positive volume growth and cost reductions to support our guidance.
Q: Can you elaborate on the impact of energy hedging on costs and expectations for 2025?
A: Nathalie Delbreuve, CFO: Our performance action plan (PAP) does not include hedging impacts. Energy costs have decreased in 2024, and we expect stabilization in 2025. We do not disclose specific hedge levels but anticipate a stable or slightly decreasing trend.
Q: What is the outlook for capacity utilization and potential structural changes in the German market?
A: Patrice Lucas, CEO: Currently, 10% of our capacity is offline, and we plan to maintain this until year-end. We are not planning additional permanent shutdowns beyond the Essen furnace in Germany. We will adapt capacity based on market demand and remain vigilant in monitoring the situation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
