Yahoo Finance Ardagh Metal Packaging S.A. (NYSE:AMBP) Q1 2024 Earnings Call Transcript
Ardagh Metal Packaging S.A. (NYSE:AMBP) Q1 2024 Earnings Call Transcript April 25, 2024
Ardagh Metal Packaging S.A. reports earnings inline with expectations. Reported EPS is $0.01 EPS, expectations were $0.01. Ardagh Metal Packaging S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Ardagh 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 you for joining today for Ardagh Metal Packaging's first quarter 2024 earnings call, which follows the earlier publication of AMP's earnings release for the first quarter. I am 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 and related materials for the first quarter can be found on AMP's website at www.ardaghmetalpackaging.com. Remarks today will include certain forward-looking statements and include use of non-IFRS financial measures. Actual results could vary materially from such statements.
Please review the details of AMP's forward-looking statements disclaimer and reconciliation of non-IFRS financial measures to IFRS financial measures in AMP's earnings release. I will now turn the call over to Oliver Graham.
Oliver Graham: Thank you, Stephen. Our performance in the first quarter was encouraging, with good volume growth across each of our markets. Global beverage shipments grew by 7% in the quarter versus the prior year, and adjusted EBITDA growth was marginally ahead of our guidance due to favorable volume and mix. In addition to continued strong shipment growth in the Americas, Europe is showing welcome signs of a recovery post customer destocking. Our disciplined permanent capacity actions are also taking effect and along with our expectation for continued volume growth and increased manufacturing activity will improve fixed cost absorption. This gives us confidence to reaffirm our full year adjusted EBITDA guidance with the expectation of higher adjusted EBITDA for the remaining quarters.
We continue to manage our capacity in a disciplined manner through a mix of curtailment and longer-term actions as appropriate. 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. The aluminum beverage can continues to outperform, increasing its share of the global beverage packaging mix and also as the package of choice for new market innovation. We believe that we are well placed to benefit from this secular growth story as a pure-play aluminum beverage can manufacturer. In light of heightened geopolitical tensions, we would also remind investors that we have no operations in either Russia or in the Middle East.
We are well hedged on our energy needs for the current year and input materials are predominantly sourced from our local markets. We continue to progress our sustainability agenda with highlights in the quarter, including an improvement in our CDP score to A- the climate change. In parallel, we are progressing a strong pipeline to improve our renewable energy mix. Turning now to AMP's first quarter results. We recorded revenue for the first quarter of $1.14 billion, an increase of 1%, which reflected favorable volume mix and currency effects, largely offset by the pass through to customers of lower metal costs. Adjusted EBITDA of $134 million was up 3% on the prior year, with 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 tightly managed relative to shipments growth.
If we look at AMP's 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 pass-through of lower input costs. In North America, shipments grew by 13% for the quarter, and we're encouraged by the sustained strong growth in shipments into 2024. This reflects our attractive portfolio mix and our pipeline of contracted growth, which supports our forecast for shipments in our North America business to grow by a mid to high-single digit percentage this year versus our estimate of a low-single digit percentage growth for the industry. 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.
In Brazil, first quarter shipments increased by 4%, reflecting encouraging strength in the domestic beverage can industry, which grew by a mid-teens percentage. AMP's lower level of shipments growth reflected customer mix effects after a very strong Q4. We continue to balance our capacity through curtailment of our network, and we're encouraged by the improved industry trends which are supported by an improving macroeconomic environment. We will closely assess customer demand needs as we now enter into the quieter winter period and are well positioned to service any higher demand by our customers. 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.
We continue to expect shipments growth in the Americas in the order of a mid-single digit percentage for 2024. Shipment growth and improved fixed cost absorption will drive strong adjusted EBITDA growth for the remainder of 2024. In Europe, first quarter revenue decreased by 4% on a constant currency basis to $481 million compared with the same period in 2023, principally due to the pass-through of lower input cost to customers. Shipments for the quarter increased by 3% on the prior year as sales volumes recovered following the decrease in the fourth quarter, which included customer destocking. We're encouraged by the improvement in shipment trends. The recovery is being 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 volume. Consumer sentiment and macroeconomic indicators have also shown some improvement. First quarter adjusted EBITDA in Europe decreased by 16% at constant currency to $43 million, as we exercised caution around the level of inventory build ahead of the summer season by pacing production. Performance was however sequentially stronger, growing by nearly 40% from the fourth quarter. For 2024, we continue to expect the low-single digit percent shipments growth as we monitor demand patterns into the summer season. Volume growth and improved fixed cost absorption supported by an increase in production activity will drive adjusted EBITDA growth for the remainder of 2024.
I'll now briefly hand over to David to talk you through some of our financial position before finishing with concluding remarks.
David Bourne: Thanks, Ollie, and hello, everyone. We ended the quarter with a liquidity position of $329 million. Cash outflow in the quarter was lower than our expectation, while reflecting the usual seasonality in working capital, with working capital outflow in the quarter of $423 million. We will continue to focus on working capital efficiencies, and our guidance for a modest full year working capital net inflow remains unchanged. AMP incurred total CapEx of $62 million in the quarter, including $38 million of growth CapEx. We reiterate our expectation for growth CapEx for 2024 of approximately $100 million, mainly comprising flexibility enhancements to our network and final cash flows for some of our growth projects, including.
Maintenance, sustainability and IT CapEx of the order of $120 million, in line with our steady long-term run rate. We anticipate a further reduction in growth CapEx again in 2025. Our net leverage metric ended the quarter at 6.2 times net debt to adjusted EBITDA, which was better than our expectation, arising from improved working capital as shipment growth outpaced production, which slowed inventory build ahead of the summer season. As previously indicated, we anticipate modest deleveraging on a full year basis during 2024 and a more meaningful reduction thereafter. We 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 $0.10 per share to be paid in June, in line with guidance.
There is no change to our capital allocation policy. AMP operates with a stand-alone capital structure, which is structurally and legally separate to that of Ardagh Group, our 76% long-term majority shareholder. On the April 15, Ardagh Group announced a new senior secured credit facility with Apollo, principally to enable the refinancing of its 2025 maturities. The details of that facility are set out in our group's filings. The facility is secured on all material assets of its subsidiary Ardagh Investment Holdings, including a pledge on the equity interest in AMP, both ordinary and preferred equity. The financing is entirely separate to the perimeter of AMP and as such, does not impose any obligations or covenants on Ardagh Metal Packaging S.A. or its subsidiaries.
With that, I'll hand back to Oliver.
Oliver Graham: Thanks, David. So before moving to take your questions, I'll just recap on AMP's performance and key messages for the quarter. Global shipments grew by 7% and America shipments grew by 11%, a third consecutive quarter of double-digit growth, and Europe experienced a good rebound growing by 3%, trends that we continue to see into April. 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 a mid-single digit percentage. And as David said, in terms of Ardagh Group's recent financing actions, we can confirm that there are no changes to AMP's capital allocation policies or how we manage our day-to-day operations.
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 growth for the remaining quarters of this year. 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. Having made these opening remarks, we'll now proceed to take any questions that you may have.
See also
20 Countries with the Highest Share of Youth Not in Education, Employment or Training (NEET) and
15 Best Places to Retire in Oregon.
To continue reading the Q&A session, please click here.
