• Revenue: EUR1,216.4 million, reflecting 0.9% growth at constant currency and comparable scope.
• EBITDA: EUR337.7 million, representing an organic improvement of 4.3% and a year-on-year increase of 7%.
• Net Income: EPS of EUR7.22.
• EBITDA Margin: 27.8%, an expansion of 140 basis points compared to the previous year.
• Net Debt: EUR299 million, with a leverage ratio of 0.7 times net pro forma EBITDA.
• Free Cash Flow Generation: Close to 13% of sales.
• Volume Growth: Increased by almost 9%.

• Warning! GuruFocus has detected 2 Warning Sign with FRA:VIR.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Vidrala SA (FRA:VIR) reported revenues above EUR1.2 billion for the first nine months of 2024, indicating a stable financial performance.
• The company achieved an EBITDA of almost EUR338 million, reflecting a 7% year-on-year increase and an expansion of operating margins by 140 basis points.
• Free cash flow generation is close to 13% of sales, with expectations to exceed EUR180 million for the full year, marking a record level for the company.
• The UK market is performing well, driven by the integration of the filling business and improved glass volume performance.
• Vidrala SA (FRA:VIR) maintains a strong balance sheet with a net debt of EUR299 million and a leverage ratio of 0.7 times net pro forma EBITDA.

Negative Points

• The company experienced a negative price mix effect, which nearly offset the 9% volume increase.
• Demand in Europe, particularly in mature markets like Iberia, remains weak, with a significant drop over the last two years.
• EBITDA performance is weaker due to price adjustments and a soft demand context, although improvements are expected in Q4.
• There is no immediate plan to increase capacity in Brazil despite running at full capacity, indicating potential limitations in meeting future demand.
• The company is forced to adapt capacity in Continental Europe due to a significant drop in demand, running at 85% capacity utilization.

Q & A Highlights

Q: After two years of volume declines in Europe, mainly in Iberia, do you see a more positive volume cycle beginning? What is your view on this, and how do you expect volume increases in Europe to take place? A: Raul Gomez Merino, CEO: We have three different markets with distinct dynamics. In Brazil, we see growth, while Europe and the UK show weakness. Demand in Europe has dropped 10-15% over the last two years. Although we don't see signs of recovery yet, demand has stopped dropping. We don't expect further significant declines in 2025.

Q: Regarding pricing for next year, should we expect any relevant price adjustments? A: Inigo Mendieta, Corporate Finance Director: More than 50% of our sales are linked to price adjustment formulas. These formulas currently indicate a small price moderation, down low single digits for next year. We don't foresee significant deflationary trends in 2025.

Q: Can you explain the sharp increase in UK margins and whether it's sustainable? A: Raul Gomez Merino, CEO: The margin improvement is due to operating leverage from capturing demand, particularly after acquiring a bottling facility in the UK. We consider these margins sustainable for 2024 and beyond.

Q: What is your capacity utilization, and do you plan to expand capacity in Brazil? A: Raul Gomez Merino, CEO: We are running at full capacity in Brazil and the UK, but at 85% in Continental Europe due to demand drops. We are not planning significant capacity expansions currently, but may consider it in Brazil in the future.

Q: With no plans to increase capacity, what is the CapEx budget for next year? A: Inigo Mendieta, Corporate Finance Director: CapEx for next year should align with this year's, around EUR160 million. This includes replacement, technical improvements, vertical integration, and sustainability investments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.