Ardagh Metal Packaging Q3 2026 Investor call - ARDAGH METAL PACKAGING SA

Explicit Guidance:

• FY2026 Adjusted EBITDA: Upgraded to $785–$795 million (previously guided approximately); reflects strong Q3 performance and robust demand.
• FY2026 Capital Expenditures (CapEx): Total CapEx guidance of $240 million remains unchanged, though growth CapEx is expected to increase significantly (see Strategic Initiatives).
• FY2026 Free Cash Flow Components: Total CapEx $240 million; Cash interest $220 million; Lease principal repayments ~$120 million; Cash tax ~$30 million; Small net working capital outflow.
• FY2026 Europe Volume: Expect to at least meet guidance for ~3% volume growth for the full year, driven by strong commercial momentum and robust demand despite tight capacity.
• FY2027 Europe Volume: Expect organic growth (A&P) in the range of 3%–4%, in line with industry as the company operates within existing available capacity.
• FY2027 Americas Volume: Expect a return to at least industry-aligned volume growth in North America and moderate volume growth in Brazil; long-term Brazilian market growth remains mid-single-digit.
• FY2027 Profitability: Expect moderate year-over-year adjusted EBITDA growth at constant currency, supported by volume growth and operational improvements despite a more inflationary environment.
• Dividends: Unchanged quarterly ordinary dividend of 10 cents per share announced; no specific FY2027 dividend guidance provided.
• Energy Hedging: >80% hedged for 2027 and >70% covered for 2028 regarding direct energy exposure in Europe.

Business-Segment Outlook:

• Europe: Revenue and EBITDA expected to grow strongly; 3%–4% volume growth anticipated in FY2027. Capacity is currently tight, necessitating investment acceleration.
• North America: Volume expected to return to at least industry growth rates in FY2027, driven by favorable category mix (energy, sparkling water, new wellness drinks) and contractual gains. Beer exposure remains low single-digit.
• Brazil: FY2026 saw a 5% shipment decline due to contract resets; FY2027 outlook is moderate volume growth acknowledging market volatility but underpinned by long-term shift from two-way glass to one-way cans.
• Category Trends: Strong growth expected in Energy and CSD (Carbonated Soft Drinks) globally. Beer cans show weakness in North America but strong recovery in Brazil. "New drinks" (health/wellness/gut health) driving growth in can packaging mix.
• Market Share: Continued share gains for beverage cans within the overall packaging mix, particularly in CSD and off-trade channels.

Market and Competitive Outlook:

• Capacity: Global capacity remains tight, particularly in Europe and key North American geographies. Industry-wide challenges expected to persist for the next 2–3 years due to high demand and operational transitions (e.g., coatings).
• Competition: No significant threat from new entrants anticipated; industry requires scale, and previous entrants during the pandemic have exited.
• Pricing/Cost: Strong pass-through mechanisms remain effective for input costs (metals, coatings, freight). Coatings (linked to oil prices) remain a key cost driver; pass-through timing may lag, creating near-term headwinds.
• Substitution: Long-term structural shift from two-way glass to single-use cans continues in Brazil and remains intact globally, supporting the industry's long-term growth trajectory.

Macro / Industry Outlook:

• Inflation: Operating in a more inflationary environment in FY2027, driven by oil prices and coatings. Management does not expect negative impact on consumer demand (volumes) as "off-trade" consumption benefits in inflationary times.
• FX: Q4 and FY2027 guidance reflect current FX rates; USD strengthening vs. EUR noted as a headwind for reported results.
• Economic Environment: Demand remains resilient across markets despite macro headwinds; no material volume degradation seen in inflationary environments.
• Raw Materials: Oil price volatility impacts coating costs; metal and freight costs are largely passed through.
• Geopolitical: Middle East situation currently "frozen," contributing to slightly more negative outlook for Q4 and 2027 input costs compared to Q2 expectations.

Strategic Initiatives:

• Capacity Expansion (Europe): Accelerating and upsizing previously announced investments to UK and Spain (two new can lines) to capture growth.
• CapEx Trajectory: Growth CapEx expected to increase from $90 million (2026) to ~$250 million (2027), before normalizing in 2028.
• Financial Impact of Investments: Expected to drive material adjusted EBITDA growth starting 2028; viewed as high-return capital deployment.
• Contract Renewals: Below-average contract turnover expected in FY2026 and FY2027 across North America, South America, and Europe. Customers are keen to secure volumes for new capacity; management is securing volumes to justify new investments.
• Operational Focus: Continued lightweighting, metal reduction, spoilage reduction, and procurement savings to mitigate inflation.

Risks and Headwinds to Outlook:

• Input Costs: Higher-than-expected inflation, specifically coatings linked to oil price spikes, impacting margins in Q4 and FY2027 before full pass-through.
• FX Volatility: USD strength vs. EUR creating reported headwinds.
• Q4 Laps: Comparison against a very strong Q4 prior year (8% growth in NA, 4% overall) creates headwinds for Q4 guidance.
• Contract Resets: Impact on Brazil volume in 2026/2027 and North America mix in prior periods; volatility in specific customer contracts.
• Capacity Constraints: Tight capacity in Europe and North America limits ability to fully capture demand in the short term, though driving investment.
• M&A Process: Sale process ongoing with advisors appointed; potential network splitting or ownership changes could impact long-term strategy, though operations remain independent.
• Debt Refinancing: Future refinancing of 2028 maturities likely to be at higher interest rates, potentially increasing interest expense in 2027.

Management Tone on the Future:

• Confidence: Strong and confident regarding long-term industry fundamentals (glass-to-can shift) and demand resilience.
• Aggressiveness: Willing to accelerate and upsize CapEx to address capacity tightness, indicating high confidence in demand visibility.
• Guidance Changes: Upgraded FY2026 EBITDA guidance; cautious but positive FY2027 outlook with specific focus on volume recovery in NA and Brazil.
• Steadiness: Emphasizes "normal" levels of promotional activity and volume growth despite inflation; no panic regarding macro headwinds.

Miscellaneous:

• Sale Process: Ardour Holdings appointed advisors for a potential sale of AMP on August 13; no details or Q&A provided on this topic during the call.
• Liquidity: Ended Q3 with $736 million in liquidity; Net debt/Adjusted EBITDA at 5.1x (5.6x pro forma excluding Q4 2025 refinancing).