Ardagh Group S.A. - Q3 Quarterly Results Call - ARDAGH METAL PACKAGING SA

welcome to the arda group essay third quarter 2026 investor call today's conference is being recorded at this time i'd like to turn the conference over to stephen lyons investor relations please go ahead welcome everybody and thank you for joining us for today's arda group investor call which follows the release of our results in respect to the 2026 third quarter earlier today. I'm joined here by Mark Porto, the Executive Chairman of RDAG Group, Todd Brents, Group CFO, and by each of the respective regional glass packaging CEOs, Alexander Kuzan for Europe, Brian Branstad for North America, and Paul Kernow for Africa. Our remarks will include certain forward-looking statements which reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors. The group's third quarter 2026 interim report can be found at ir.rdiagroup.com. RDI Metal Packaging, or AMP, released its third quarter results earlier today, and a replay of its earnings call is available on its website. As usual, we will not be providing additional information regarding AMP on this call. With that, I'll hand it over to Mark. Thank you, Stephen. Prior to taking your questions, we Will make some brief opening remarks covering our third quarter performance, the turnaround initiatives underway to improve performance in art-on-glass packaging, and our outlook for the business for the remainder of the year ahead. ARDA group delivered a resilient performance for the third quarter, with adjusted EBITDA broadly in line with the prior year quarter, despite the more challenging macroeconomic environment. Performance for AMP included adjusted EBITA growth slightly ahead of guidance and growth in global beverage can shipments. Performance in AGP was in line with our previously lowered expectations following the disruption in global energy markets, with lower adjusted EBITDA versus the prior year quarter, reflecting inflationary pressures and challenging glass operating conditions. Since our last update, AMP has moderately upgraded its full-year 2026 adjusted EBITA guidance range and has indicated plans to accelerate its growth investments in Europe, reflecting strong customer demand. AGP is pleased to be able to maintain its full year 2026 adjusted EBITDA guidance with no additional downgrade, despite persistently high energy prices, which is a testament to our energy hedging strategy, for which we'll provide some further detail when we talk through Europe's regional performance. We continue to forecast a slight decline in global glass packaging volumes for full year 2026, which is unchanged from our last update, but with a change in the mix as we expect slightly stronger shipments in Europe and Africa, which will offset softer-than-expected shipments in North America. In our last update, we talked you through our Clearly RDoS strategic initiative, and I'd like to outline today further actions that we are taking consistent with the foundational pillars of this strategy. First, in terms of strategic capacity and network evaluation, which means deploying the right resources from our people to our capital in the right places to meet our customer needs. We are in discussions over proposals to close some of our underutilized glass manufacturing capacity in Northern Europe, where demand conditions are most challenging. Second, looking at our end-to-end performance, which means focusing relentlessly on efficiency and continuous improvement across our operations. We have taken action to improve SG&A efficiency across both AGP regional and corporate functions, and we expect these actions to largely complete by the end of the first quarter of 2027, with associated efficiency savings thereafter. Third, portfolio value management, which relates to changing our approach to commercial engagements to ensure that our relationships deliver value for both our customers and for us. Paul will talk to you through the successful restart of our facility in Ethiopia, which was enabled by the strength of our key customer volume commitments. Finally, we mentioned a people-powered culture, which involves reinforcing a performance-driven culture by decentralized operational decision-making, enhanced performance metrics, and investing in our people. An example of what this means in practice is our recent decision to change our regional CFO reporting lines, who will move from reporting into the group CFO to reporting into regional CEOs going forward, with similar organizational changes across procurement and logistics functions. These changes are about creating clearer accountability, enabling faster decision-making, and giving regional leadership greater ownership for delivering local priorities. They are intended to simplify how we work and ensure teams are connected more closely to the businesses and customers they support. In terms of other strategic items, following the decision of Ontario Teachers' Pension Plan to sell its majority stake in Trivium Packaging to Silicon Holdings and funds affiliated with American Industrial Partners, Arda Group, as a minority joint venture partner, has entered into the agreement to sell its stake in Trivium. The transaction values Triviam at approximately $3.4 billion. The proposed acquisition is expected to close in mid-2027 and is subject to required regulatory approvals, completion of applicable works councils, consultations, and satisfaction of other customary closing condition. The transaction is expected to result in estimated net cash proceeds to Ardai Group of approximately 90 million U.S. dollars. The disposal of a non-core investment helps to simplify our overall business and organizational structure with the expected net cash proceeds to be used towards reinvestment in the business or towards debt reduction. separately with respect to our ownership in AMP. On the 13th of August, an announcement was filed indicating that the Board of Directors had instructed advisors to prepare for potential sale of AMP, that no deadline or definitive timeline for the completion of the possible sales process had been set, and that there can be no assurances that this process would result in any transaction or particular outcome. Subsequently, on the 16th of September, a summary judge of the District Court of Luxembourg issued an order prohibiting RDA Group from proceeding with the sale process. The order was issued following a unilateral ex parte application made against RDA group without RDA groups having had the opportunity to present its position. We successfully challenged this order, and on the 14th of October, this order was withdrawn, following which we have reengaged with our advisors on this process, which remains at an early stage. Investors can view these updates in full on our website, and we will not be providing any further commentary on the AMP sales process by matters before the Luxembourg Court beyond what is included in the press releases on our website and in our financial disclosures. And we will update as appropriate in due course as circumstances develop. Furthermore, as previously indicated, our primary focus is on value creation for our shareholders, both organic improvements for improved business performance, as well as through considering inorganic levers. But we do not comment on media speculation, nor will we provide a running commentary on possibilities or scenario analysis. If we have any updates to share, we will do so through the appropriate channels and to all investors at the same time. I'll now hand over the call first to Todd and then to each of the regional CEOs to talk you through our financial and market performance for the quarter before finishing with some concluding remarks. Thanks, Mark. So I'll begin with some R&R Group financial highlights for the third quarter. In quoting these amounts at cost of currency, the third-quarter revenue, $2.8 billion, was 11% higher than the same quarter last year. This reflected 19% growth in AM, with AGP revenue broadly unchanged. Adjusted EBITDA of $392 million declined by 2% compared to the prior year quarter. This was driven by a 6% decline in AGP, partly offset by 2 percent growth in AM. So, reviewing the third quarter performance by segment, again on a constant currency basis, I'll begin with metal packaging. Global beverage can shipments increased by 2%. 2% in the quarter compared to the same period last year, with a 6 percent increase in Europe, partly offset by a 1% decline in the Americas. Revenue of $1.7 billion for the quarter grew by 19%, reflecting the past year of higher input costs, mainly higher aluminum costs. Adjusted EBITDA of $213 million represented growth of 2% for the corridor driven by Europe and was ahead of AMP's guidance range of $200 to $210 million, with a strong performance from both segments. Furthermore, AMP has upgraded its full-year adjusted EBITTA guidance range for 2026 to be between 785 and 795 million. Moving to glass packaging performance, also on a constant currency basis, third quarter global shipments declined by one percent, driven by shipment declines in North America. Third quarter revenue of 1.1 billion was relatively unchanged from the same quarter last year. This reflected the pass-through of higher input costs, offset by lower shipments. Revenue in our Europe and Africa segment of $741 million in the third quarter was 3 percent higher than the same period last year, which reflected higher shipments in both Europe and Africa, as well as the pass-through of higher input costs. In Glass North America, third quarter revenue of $350 million was 5 percent below the same period last due to the impact of lower shipments, partly offset by higher sales prices. AGP adjusted EBITDA decreased by 6% compared to the same quarter last year to $179 million, broadly in line with expectations. Adjusted EBITTA for the Europe and Africa segment decreased by 3% compared with the same quarter of last year, to $138 million. This reflected lower input cost recovery across both regions, including the impact of higher energy prices, and negative sales mix, which was partly offset by the contribution from higher shipments in both regions and lower operations and overhead costs. Adjusted EBITDA from North America decreased by 15% compared with the same quarter last year to $41 billion. The deterioration of performance for the quarter reflected weaker shipments versus expectations and higher operational and overhead cost, including impact from ongoing curtailment to reduce inventory and generate cash, and partly offset by stronger input cost recovery. In terms of our capital structure position and overall liquidity, I'd note the following. Net leverage at the Argonne Group, which excludes debt and the metal business, was five times adjusted EBITDA as of September 30th. Total cash and available liquidity, excluding AM, was $734 million. In terms of our outlook for cash flow technical items for AGP for the full year of 2026, we expect the following, which are slightly more favorable versus our last update. Total capital expenditures of approximately $330 million as the business catches up on its maintenance capex following two years of timely managing capex given liquidity constraints. cash interest of around $380 million, cash lease payments of approximately $110 million, and we continue to expect positive working capital inflow, i.e. for working capital to be a source of cash, helped by our ongoing actions in both North America and Europe to right-size inventory. Cash taxes of approximately 40 million, Cash operated exceptional costs of approximately $40 million, which includes costs related to the facility closures, as well as strategic exceptional costs of approximately 45 million, which includes cost related to our IT separation project and SG&A reduction initiative. We also concluded on July 28th our excess proceeds offer, in which approximately $90 million of the $290 million of the preferred shared proceeds received from AMP last December was used to redeem outstanding first-lane and second-lane notes. I'll now turn it over to Alex Cousin, who will provide some additional comments on European market performance. Thanks, Todd. And hi, everyone. Looking at performance for the European business in the quarter, third quarter shipments were up 1% compared with the same quarter last year, so slightly below expectations. Operationally, our performance in the quarter was negatively impacted by expected energy-related inflationary pressures and negative category mix. This was partly offset by the contribution from higher volumes and lower operations and overhead costs, including some success in general cost discipline. Looking at our performance by category, we experienced strong growth in food and non-alcoholic beverages with lower growth in beer. This was mostly offset by significant declines across spirits and wine and sparkling wines. On a by-country basis, we experience good growth in Poland, in Benelux, and in Italy. But we also saw continued weakness in our two largest markets, the UK and particularly Germany. We welcome the recent decision by the UK trade authorities to impose countervailing tariffs on glass packaging imports from China, including beverage products, following its anti-dumping trade investigation. This outcome ensures a more level playing field and supports strategically important domestic manufacturing. Given some stabilization of our volumes, we now expect for full-year shipments to decline by a low single-digit percent, which is an improvement from our last guidance of a low mid-single-digits percent decline. When I last talked to you, I outlined how we have two fundamental issues impacting our performance in Europe. The first is the challenging external demand environment and the impact this has on in terms of pressure on our capacity. The second was the heightened pressure on input cost and the challenge in passing through these costs to our customers. On the first issue of balancing our capacity with demand. In response to market conditions we are reviewing possible closures in Denmark and in the UK. This includes one of the two furnaces in our Holmegaard facility as well as one of two furnices in our Nottingley facility, where we previously mothballed a third furnace. We are currently engaged in discussions on these proposals with local management teams and employee representatives. Ongoing supply will not be affected by these proposals and we will continue to to service our customers from our network of facilities in the Nordic and UK regions and across Europe. The proposed closures follow on from our action in Germersheim, where capacity was shut down in September of this year and our previous action in Drepkow last year. These actions give us optimism that we can appropriately balance our capacity in line with demand conditions strengthen performance and improve the resilience of the business in total our combined proposed capacity actions in 2026 could permanently remove approximately 450 kilotons from our network following these actions our expectations for 2027 is that our network will be closer to fully booked that is in line with our expectation of lower shipments i.e an approximate mid single digit percent decline following some expected margin enhancing portfolio management actions as mark pointed out in his earlier part which will further improve our business mix but against the highly utilized footprint on the second issue of input cost pressures and the challenge in passing through these costs since our last update global oil and european energy prices both current and future expected have deteriorated further notwithstanding this backdrop our q3 performance and full year 2026 outlook remains relatively unchanged versus our prior expectations this is testament to our hedging program and management of energy pricing with our customers which helped mitigate the impact of the energy price escalation seen during 2026 let me hand over to vincent godfrey our chief procurement officer to elaborate further vincent thank you alex by way of background following the outbreak of war in ukraine and the subsequent price volatility seen in european energy markets glass packaging fundamentally redesigned its approach to energy procurement and risk management The objective is not to predict energy markets, but to protect the business from extreme price movements and improve cost visibility. Broadly speaking, Glass Packaging Europe manages energy in two ways depending on customer requirements. Around 50% of our gas consumption and 60% of our power is for customers who either elect to fix energy costs through forward purchasing, remain exposed to spot market prices, or adopt a combination of the two. In these cases, energy costs are passed through to them accordingly. The balance of consumption is where glass packaging remains some direct exposure to energy market price movements and where our risk management strategy is applied. Note that many contracts in this category contain hardship provisions where glass packaging can recover costs if extreme circumstances prevail. The strategy is founded on a simple principle. Energy markets cannot be predicted with sufficient reliability to form the basis of a winning trading strategy. Instead, glass packaging focuses on securing a substantial proportion of its requirements progressively over time, reducing exposures to short-term market volatility. The result is that glass packaging's exposure to energy price volatility is materially lower than it was during the 2021-23 energy crisis. packaging's forwards position helped mitigate the energy price escalation seen during 2026 and provide substantial visibility and certainty for over 90 percent of anticipated energy requirements into 2027 reflecting positions built progressively over the preceding three years similarly under our hedging strategy today we have positions as far out as 2030. let me hand back to Alex for a few closing remarks on Europe thank you Vincent as you've heard our dollars average forward prices secured are materially lower than available to buy in the market today for our multi-year contracts our pass-through formulas will reflect this adjustment where applicable and in the case of our annually contracted volumes we will seek a fair and appropriate recovery of our energy costs which have weighted on our 2026 performance following the middle east disruption through our commercial discussions with our customers with that i'll hand over to paul to talk us through the african business thanks alex this afternoon all so looking at performance for the africa business in the third quarter shipments increased by two percent which was broadly in line with the expectations and cycled a more normalized prior year quarter. Overall demand continues to track 2024 levels as we recover from a muted 2025 volume performance. By region, we saw good growth in our largest market, South Africa, which came in slightly ahead of expectations. South Africa continues to benefit from export growth into neighboring countries, notably in the growing one-way convenience segment. As customer delivery systems in these export markets start to add one-day packaging, this trend is substantial long-term positive multiply effects. Nigeria shipments were ahead of the prior year and Kenya airshipments were broadly unchanged. Both countries' facilities are operating at maximum capacity and benefiting from positive economic trends and a continued diversification of our product mix and customer portfolio. Shipments declined in Ethiopia as we exhausted our finished good stock. However, we were pleased to restart our single furnace plant in September after almost a year without normal production operations. This was enabled by partnering with our key global customers on long-term volume commitments. Overall demand in the country remains muted, over and market conditions are challenging we have therefore restructured our operations to operate below nameplate capacity for now while ensuring continuity of supply to our key global customers until demand recovers we also began the rebuild of our furnace in kenya in september and expect to resume production next month during this period we will continue to supply key customers with spare capacity in south africa and europe we had a strong operational performance in the quarter that we continue to face high inflationary pressures as the impact of the middle east conflict continues to manifest itself in ongoing increased energy prices and distribution costs. The contribution from higher shipments in the quarter was also partly offset by a slightly negative category mix effect. While two furnaces in South Africa remain mothballed, we reduced stock in some outer lines in the Quarter and demand is now in line with our current operating capacity for each of South Africa, Nigeria and Kenya. Looking at performance by category versus the prior year, we experienced strong growth in food and non-alcoholic beverages as well as a good performance in the premium one-way beer segment. Spirits and pharmaceuticals seem to have stabilized and returned to slow growth, but wine and sparkling remains under pressure. Given the strong year-to-day performance, we now expect full-year shift in growth of a mid-single-digit percentage. I'll now pass on to Brian to talk you through the North American business. Thanks, Paul, and good afternoon. Looking at the performance for North American Business in the quarter, third quarter shipments were down 6% compared with the same quarter last year, below our expectations following favorable performance in the first half of the year looking at performance by category shipments across most of the categories came in below our expectations beer was the only segment to experience gross versus prior year however this beer growth has was below the expected or the level experienced in the 1st half of 2026 and we believe reflects some destocking post the the customer stock bill into the World Cup in summer months. All other categories saw shipment declines, and in particular, with significant declines across the spirits and wine categories, which remained pressured due to changing customer taste and continued general softness across the segments. Operationally, we had a few challenges in the quarter as we experienced some disruption to our manufacturing operations, including weather and other external events out of our control. Furthermore, this was in addition to our ongoing curtailment action to reduce inventory levels, which while positive from a cash perspective, does impact profitability and is expected to continue throughout the remainder of the year. We continue to closely monitor market conditions before bringing our curtailed capacity fully back online, as well as evaluate our overall network given the demand scenarios that we're seen particularly in the wine and spirits segments and we will take the necessary steps as appropriate to ensure we are balanced we balance capacity with demand reflecting on the weaker third quarter performance and the soft outlook for the remainder of the year we have reduced our expectation for full year shipments we now expect a low to mid single digit decline in 2026 below our prior expectation of low single digit to climb i'll now hand the call back to mark to make some closing comments thanks brian and thanks to paul and alex and uh for their participation again in the quarterly earnings call so before moving to take your questions i'll briefly recap our performance and provide some commentary on 2026. against an uncertain macroeconomic environment with industry and customers facing increased inflationary pressures the group delivered a resilient performance, with adjusted EBITDA broadly in line with the prior year. AGP was in line with expectations, and AMP moderately exceeded its guidance. AMP has upgraded its adjusted EBITda guidance for the current year to between $785 and $795 million. For RDA glass packaging, notwithstanding persistently high energy prices, we are reaffirming our full-year adjusted EBITDA guidance, which was previously lowered following the disruption in global energy markets. Reflecting demand conditions in the glass packaging market and consistent with our clearly RDoS strategy, we're in discussions over the possible closure of two furnaces in Northern Europe to address underutilized capacity to better balance our network and improve performance. Finally, the announced sale of our stake in Trivium Packaging represents a pleasing outcome, further simplifying our overall structure. Upon completion, the expected proceeds are to be used towards reinvestment in our business or debt reduction. And we're now pleased to take any questions that you may have. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If your using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 to signal for a question. And we'll go right to Roger Spitz with Bank of America. Thank you, and good afternoon. Paul, can I start with you? Two questions. Would you be willing to provide consoles or Africa's 24, 2025, and LTM Q326 EBITDA? Roger, no, we don't disclose at this level, yeah. Okay. Did you say, Paul, that the two South African furnaces remain mothballed? And if that's the case, can you remind us how many South African furnaces in total you have and in total within Europe, in Africa? So it represents about 10% of our nameplate capacity that's currently mothballs. And that's correct. There's two furnaces there. Got it. And then just a question, maybe this is for Brian or Alexander. It's just interesting that North American glass is falling much faster than continental plus UK European glass. what's going on is there a different view of take up of GLP or health consciousness or it's just the way the market is and people like their beer and glass more in Europe than in the U.S.? I would suggest your first comment regarding health conscious and GLP that's certainly a part of it I would also suggest that there is significant import pressure in North America import you mean is that mainly from like china does china still years ago you've said that china was like one third of the imports into into north america is that still fair yeah china you china used to be i would tell you the largest importer uh is is mexico today uh although we see it from multiple locations okay great i'll pass it on thanks very much If you find that your question has been asked, you may remove yourself from the queue by pressing star 2. We'll go next to Ed Brucker with Barclays. Thank you. You know, I understand that it's early, we haven't even finished 2026, but is there any way you could give us something directionally heading into 2027, you know, given all that's going on with energy that seems to be persistently high, especially as you kind of reset hedges going forward. And then also, you know, the demand picture, maybe longer term, plus that offset maybe by some of the cost savings that you're going to get. Yeah, Ed, Mark Porto here. Thanks for the question. You know, we're right in the middle of all those analytics right now. This is the time in which we're preparing our budgets. And we're obviously looking at all the things you just mentioned, the demand profile. We have to make assumptions about energy. We've got to do the math on our hedging position. Our intention, because we haven't finished that work, our intention is to give the 2027 update in February. So if you'll hold that question for when we are next on the call, we'll be able to answer it, I think, and give you the answer that you're looking for got it um thanks that was kind of what i was expecting uh my second one is just on on the um uh the energy exposure in europe if i got it correctly it's 50 of the energy exposure that you have is directly passed through and then the other 50 is uh is where the hedges uh are used and then with those hedges as you kind of place them should we expect the hedges being you know set at these higher or elevated energy prices so the exact numbers are around 50 percent of our gas consumption and 60 percent of our power is for customers where we pass that through directly according to their preference around fixing remaining open or a combination of the two I think it will suffice to say without given the full details, that we run a rolling cover plan, which obviously reflects the market at that point in time. Thanks. And then just my question, are you seeing any impact from some of the protests that have been going on or unrest that's been going in France? we are we are not commenting on that and we don't see current impact it'd be way too fast got it and we one thing maybe one thing to add um as you know we do not have operations in france so we will probably not be exposed to that as much as others We go next to the line of Kirk Lutke with Raymond James. Hello, everyone. Thank you for the call. You mentioned the closure of two furnaces in Northern Europe. I was hoping maybe you could elaborate on the overall program. In terms of, you know, where the utilization rates are today, the timing of the closures, what your targets are, cost savings, the cash costs of those savings. Is there anything you can share on that front just to help us understand where we're headed? Thank you, Raymond. Thanks for the question. Yeah, so as we said, we are starting discussions on the closure of these two furnaces. You see, as we said in the last call, one of the strategic pillars of our strategy is to make sure that our capacity footprint is aligned with the demand, and we're continuously reviewing that. And obviously, the first review when I joined in June was in this last quarter, and that led to the decision to curtail capacity. What I would say is for the next year, we see our capacity network much better balanced our expected demand and would hope to see the effects of that. Thank you. Yeah, I was going to say, Kirk, I would add this. This is Todd. You'll notice in the financials, we've looked at $15 billion impairment related to PP&E to the two furnaces. so that's a non-cash impairment charge that we booked. The cash costs associated with the closure are still TBD. As I mentioned earlier, we're having discussions with management and the local employee representatives, so the details of how that's going to play out from a cash perspective still remain to be seen. Got it. I appreciate it. Looks like a big competitor is pursuing something very similar, and can you maybe talk about the competitive landscape in both regions and how you see that evolving? I suspect that's a positive to the extent competitors close capacity, but just curious what you're thinking. Yeah, I mean, Kirk, we just, I means, we obviously pay close attention to what our competitors do, and we obviously know what the market is, but we just don't comment on, we just don' t comment on competitor activity for the reasons I know you can appreciate. Okay. Thank you. You affirmed your 26 suggested EBITDA guidance. I might have missed it. Did you mention your longer term? I think last call you mentioned fiscal year 30 up 20% versus 25%. Is Is that still the target? You're referring to the clearly are the targets. Yeah, I think, Kirk, for now, we're not going to amend that guidance. But, you know, as I said, you earlier, we're still working through, you now, our analytics on what we expect with 2027. that we have to make some assumptions around how long we think you know the current challenges are going to are going to persist so i think we'll have more information for you in feb on both 2027 and you know if we need to amend our outlook out to 2030 we may choose to do that in february or may choose reaffirm it but we want to go we need to take a step back obviously this is all very assumption driven and we're in a very very volatile and difficult to predict environment right now. But for now, we're not amending our guidance on the clearly arduous targets that we put forth previously. Got it. Appreciate it. I can only imagine how complicated the forecasting is. Then last topic, you provided the cash requirements for fiscal 26 and that's much appreciated um can you do you know offhand what the year-to-date numbers are i'm just trying to get a sense for the you know the cash flow in the fourth quarter and i you know like for instance the the year to date uh for leases uh and the two restructuring items, if you have them. Yeah, Kirk, this is Todd. The charges year-to-date for the restructuring are $48 million. That's the charge that we booked for the government to close it largely. And so that's the, you know, the charge for that. Not all, you know, that cash will largely go out by the end of the year. Some of it will go out in 27. And then the other item that's reflected in those exceptionals is a disclosure we make about IT transformation and other costs in our exceptionals. That number is 34 million year-to-date. There's a little bit of AMP activity included in there because these are consolidated financial statements, but it's about 27 million year-todate from the class side. Okay. I appreciate it. Thank you. Our next question comes from the line of Patrick Rogers with Diameter Capital Partners. Hey, thanks for taking my question. It sounds like you've done an impressive reform of the energy policy and doing a good job at controlling what you can control. And thanks for the disclosure on 50% of gas hedge, 60% of power. I guess of the remaining that is not directly passed through, can you give us any color on how much is actually hedged, you know, into 2027 currently? Maybe how much was hedged before this most recent spike, kind of middle of the year? Any color that you can provide there would be very helpful. you yeah thanks for the question Patrick but I do need to correct the earlier point what we were saying is that in our portfolio we have two types of customer around 50% of the gas consumption and 60% of power is for customers who effectively manage that where we pass through the cost directly to them so they can choose to fix it or leave it open but we pass it all through to them regardless of what option, which leaves 50% of gas and 40% of power at our risk. Going into 27, 90% of that is covered. So of our own risk portion, 90%of that is covered. And as I said earlier, we execute a rolling cover plan. I'm not going to give the details of that or when we buy or how we do it. But obviously, when we do execute those forward purchases, it reflects the market at that point in time and we came into 26 and a very similar position to how we're entering 27. Thank you and you had mentioned sort of a portion of the volumes which are more like go get you need to go get price to recover some inflation. Was that a percentage of volumes, could you repeat? And is that just recovering 26 inflation already in the P&L, or is there a meaningful amount of incremental inflation that then needs to be captured as we head into the 27 contract negotiations? Thanks for the question, Patrick. Alex here. So this is an ongoing discussion with our customers, and it depends customer by customer, but we're continuously making sure that we fairly pass on the costs that we are incurring. As you think about the inflation that you mentioned you under-recovered this year that is already in the P&L, thinking about 27, are we going to see a step-up, maybe like in a dollar amount, a step up of inflation that is a headwind more so than 26? Like, is the price that you need to get for 27 to be price-cost neutral more or less than what you've under-recovered in 26? Yeah. So, Patrick, we haven't finished those negotiations. They typically happen and are effective on the 1st of January for most customers. So obviously we're starting to have those conversations now. We're doing that math now, but we couldn't answer that question now because we're not there yet. Got it. So even how much price you need to go into those negotiations asking for, it's too early to tell on that front. Well, we have a calculation, But, you know, we don't want to disclose what our position is for obvious reasons, because that's a valuable piece of information that, you know, our competitors and our customers would want to know. So, you know, that's something that we only discuss with specific customers in the context of, you know, confidential discussions and negotiations. That's a very sensitive piece of information that we will not disclose. Totally understood. Thank you very much. You're welcome. We go next to the line of Brian DiRubio with AGI. Good morning, gentlemen. Allianz Global. A couple of questions for you. Just on your business mix, have you ever disclosed what percentage of your business is exposed to the wine and spirits business by region or maybe an aggregate? Yeah, Brian, if you look at our Q4 investor presentation back from the start of the year, you'll see we have a pie chart given the segment mix by each of the three regions. And has that changed much over the year? Wouldn't have changed too significantly, but noting Alex's comments and Brian's comments on the performance of the respective categories, particularly spirits and wine, will be lower. Okay, understood. Appreciate that. And then second question is just as we think about the actions you're taking on closures, where is the capacity utilization rate right now, particularly Europe and the Americas? And with the actions that you're taking, where do you think that will go in 27? thank you brian alex here for europe um so as i said um capacity um was you know we had some over capacity in a couple of regions in europe and we were adjusting we're expecting capacity to be pretty much in line with demand close to 100 hey brian how you doing this is brian brandstetter from north america um listen we this is a this has been a journey for north amerika We've been managing this for the last five years, and we are always looking at what demand looks like and what our footprint needs to look like. In general, right now, we have two lines curtailed. I would say that's probably 3% of our capacity. And we're analyzing the information for 27 as we speak, and will make those determinations as we move forward. This is Paul for Africa. So in Nigeria and Kenya, we're in balance. In Ethiopia, we have some small amount of capacity operating that we have not full jet. And in South Africa, we Have the two mothball furnace, but all of the hot capacity is in use. Great. Appreciate the call. I'll turn it over. We'll go next to Peter Johnson with TCW. Hey guys, thanks for the call did you. i sorry if i missed this did you guys unpack a little bit of what uh happened in north america um in the corner was there some full forward demand maybe around the world cup that didn't materialize and then some customers destocked or any reason why that the shipments kind of decelerated from q1 q2 peter how you doing this is brian um i wish i had a crystal ball and knew that answer it was you know obviously we had a very solid first half uh and the third quarter was was extremely soft uh i would tell you that it's probably a mix of things i think there is some destocking specifically as we mentioned in the in the beer segment um and and then wine and spirits wine has been soft all year spirits was actually kind of holding up a little bit in the in the first half and drop significantly in the quarter. So I don't have a really good answer for that, except the market remains soft. Got it, thank you. And then as you guys mentioned on the call, the imports coming in from Mexico, are you guys able to see like how much quantity is coming in and is that increasing kind of month over month, quarter over quarter, or is it mainly stable? I would tell you throughout 2026 it has increased imports this year are up high single digits and any expectations going forward do you guys have any color there or that rose no Thank you. Our next question comes from the line of Sejong Shah with Morgan Stanley. Hi. On the first question around energy hedging, could you give us a sense on how much of next year's hedging is done in the one year prior to the start of the calendar year and roughly what the shape of that uh hedging profile looks like um and then could you just confirm what is the nameplate capacities now across each region and as i understand it the two plants that you're mothballing could you Just reconfirm how much capacity that actually takes out and then again just confirm so the 48 million of charges will that cover both of the plants or is there a And then, or is there any further charges from a P&L perspective? And then just the cash numbers, exactly what are the expectations for Q4 and then 2027 on those exceptionals? Yeah, Sajan, as it relates to the hedging and the, you know, if we we're not going to comment on the the essence of the rolling cover plan and how it's architected because obviously if we were to tell you other people go do the exact same math that you're doing and they could essentially compute out our cost structure and energy and so we we just are not going give out the details on how that plan is architected and what the the average pricing is other than what vincent said as it relates to the extent of coverage in 2027 and the percentage of the uh cost in each of the two categories so unfortunately we we can't answer that as it relates to the the overall you know capacity by region that's also a question that you know we we we cant answer because it would describe to a competitor our available capacity and they could presumably deduce you know they they could use that information and to essentially compete against us. So that's something that we're not comfortable disclosing either. And as it relates to the charges, I'll let Todd comment on that. Yeah, the charges that we've recorded so far just relate to Girmashine. Other than that non-cash impairment for PP&E that I mentioned related to the two furnaces in New York that we were going to be shutting down. So the Girmishine was the one that's been booked so far. The charges for closing those two furnances are still TBD, like I mentioned earlier, so that timing will come. In the future, I won't say if that's 26 or 27, not clear yet, but that'll come soon. So, in terms of the executives going into 27, by nature, they're outliers, items that come up unexpectedly or that aren't planned in advance. And so, nothing on the facility restructuring side that's planned for 27 at this point. You've analysis comments particularly on our planning efforts around that um the one thing i will say is on the i.t transformation cost those will continue into the first part of 28 that's related to the separation of i.d systems and so that that schedule will be wrapped up into one um of next year so there will be some costs that uh that we encourage 27 27 related to those thank you we'll turn next to devin patel with city Hi, thank you for the call. Two questions from me. So what is the expected timeline for the metal business sale? And then the second question, you've mentioned the hedging strategy for 2027, but are you guys actively hedging for 2028? And what is implied cost for that? David Morgan Yeah, thanks, Devin. You know, as it relates to the AMP timeline, we can't comment on that other than to say that we, you know, I commented earlier, we, you know with the injunction withdrawn that we're now back in the market exploring our opportunities. So, I'd prefer to not comment on anything related to timing because, you now, we're still very in early stages as it related to that process. Vincent, though, I think answered your question on energy. Yes. As Mark said earlier, we wouldn't disclose the exact details of the RAMP program that we use, but suffice to say that we already have energy purchases out as far as 2030. Great. Thanks so much. Appreciate it. We'll go next to Jad Hamsi with Marshall Waste. Hey team, thanks for taking the time. There seems to be a hell of a lot of confusion around the hedging program and in short, kudos to you guys given how you've sort of managed through 26. Just for the avoidance of doubt, in the event that we see energy deflation next year, what would happen to the program? Is it essentially, you know, we would get to realize the benefit of energy prices heading in the right direction? There would be some benefit, but as we said, we're not seeking to speculate on energy. The objective of the program is to protect the business from extreme price movements and improve the cost visibility, which is what we've done. So, yes, of course, there would be Some benefit if energy prices come down next year. Right. Great. Thank you very much. And then lastly, nice to hear on the sort of review of mothballing some incremental capacity. You know, all else equal, and I know that's a very difficult sort of scenario to paint, but all else igual, you know, how should we think about dimensioning the sort of margin uplift across the European business, if you could provide some? And I know we're sort of early in MNC, but that would be very helpful in just thinking through. Yeah, I think I think the best way for us to respond to that is to, you know, is to wait until we give the twenty twenty seven budget, which will do the outlook for twenty seven, which we'll give you in February. And from that, you'll be able to you'll get the answer to that question and that you'll you'll gets some guidance from us and you can deduce the answer. To that. So, yeah. So I'll leave it. I'll Leave it at that for now. Awesome. All right. Thank you for the time. Congrats again. We'll go next to Michael O'Dell with Mid-Ocean Partners. Hey, guys, thanks for taking the question. Just a quick point of clarification. So on your open energy exposure and power exposure, of that for the full year, 27, 90% of it is covered through hedges of some sort, is that, am I understanding that correctly? That's correct. Okay. And for 28, is it 50%? Can you just give us some guideposts in terms of what magnitude you have hedged in 28? As we said earlier, we wouldn't disclose the ramp. Okay. Okay. All right. Thanks, guys. We return to Roger Spitz with Bank of America. Thank you for the follow-up. Just had two. Brian, where do you think North American industry glass volume percent change is, recognizing that your volumes and maybe OIs are impacted by these imports? Thanks, Roger. I'll tell you that it's It's probably high single digits. Down single, mid-singles, did you say? I said high single-digits. Down high single digit. Okay. Yes. And then how are importers, besides Mexico, able to land heavy glass bottles cheaper than, like, you can manufacture them? I mean, there's the freight costs of shipping, what I call heavy air, and presumably some of these jurisdictions have higher gas and energy prices than the United States. How are they able to do it? It's interesting you should mention that. I think Alex mentioned it in his. I mean we do believe in some cases there's dumping happening, and then we've actually gone down that path. But, obviously, labor is significantly cheaper in other locations. I'm not going to speculate on anything else beyond that, but that's what we believe. And I will call to your attention just a simple factor about glass production. It has a high fixed cost, and so incremental cost is obviously very, very low because a large percentage of the cost of making a bottle is fixed cost absorption. So somebody seeking to take, you know, incremental, you know, unused capacity into export could do so at, you know, anything above contribution with a positive contribution margin would make economic sense. So in other words, people exporting don't just necessarily look for full, you You know, don't price on a fully allocated basis in some cases. Makes sense. Thanks very much. Sure. We go next to Kunal Gupta with Manulife. Hi, guys. Thanks for taking the time. First, a question on the capacity reduction. So I think in the prepared remarks, you said that there was 450,000 kilotons taken out. I assume that's on a consolidated basis for you guys. And can you remind us what percentage that is of your total capacity that you're going to be taking out year to date? Thank you, Kunal. This is Alex for Europe. And you're right, it was 450 KT, but this was specific to Europe. And this included the actions that we took in 2026. And we obviously will not disclose the percentage of that with regards to our full capacity. Okay. And then on the France, can you just give us a sense of how big that is in a percentage of sales basis? Like is it 1% of sales, 10% of sale? I can't actually let the risk go. Yeah, for obvious reasons. Kunal, thank you again for the question. We cannot disclose that because it obviously leads to triangulation, so hope you understand. This concludes our question and answer session. I'll turn the floor to Mark Porto for closing remarks. Well, we want to thank everybody for participating today. I think, you know, of all the calls that I've had since I've been here, this is the one where we've had the most questions and most intense interest in the business. And I thank everybody for really taking the time to dial in and to ask us thoughtful questions. We look forward to talking to you on our next update, which will be in February. And until then, we hope that you all have a happy rest of the year and happy holidays. Thank you. This concludes today's conference. We thank you for your participation. You may disconnect at this time.