Verallia Société Anonyme (VRLA) Earnings Call Transcript & Summary

Hello, and welcome to Verallia Financial Results for Financial Year 2022. My name is Risteen, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand the call over to your host, Patrice Lucas. Please begin. Thank you.

Good morning, everyone. I hope that you are all fine. And as usual, it is a privileged moment for myself and Nathalie to share with you our results for '22 and then guidance and Q&A. We have updated what I can call our ID card. So now we have 63 furnaces, thanks to the acquisition of Allied and with the furnace, which has been started a few weeks ago in Jacutinga in Brazil. And then we are present in 12 countries, our 11 usual countries plus U.K. Going directly with some key highlights. What I would like to share with you first is some data about the market. Here, you see the market evolution from '15 to '21, and we see that the market has been growing an average of 2.9%. And our internal estimation is that the market minimum in being in a cautious way is going to grow by 2% the coming years. And you may have seen lately, the data, which have been released by the European federation of glass, which are showing that in 2022, in H1 '22, compared to H1 '21, the global market in Europe has been progressing by plus 8% in tons and plus 8.5% in units. So we are still seeing a dynamic market in front of us, and especially in a tight supply environment. A quick update on our key industrial projects. So you know that these projects are strategic for us. So again, I will come back in a moment on Jacutinga, which was a big success. But we still have in front of us 2 new furnaces, which are moving forward. So one in Campo Bom in Brazil. You remember that we're going to launch an oxy-combustion furnace, which will allow us to reduce by 18% of CO2 emissions compared to a traditional furnace. And we are planning to start beginning of '24. And the second one in Pescia Italy, which is going to start in Q2 '24. And then lately, we have announced additional capacity to come by '25 and '26, one new furnace in Spain and an additional one in Italy. And this is clearly demonstrating our willingness to keep on growing, to keep on being able to go along with the market growth we see and better serve our customers. Capacity increase is obviously new furnaces, but not just new furnaces. And as you know, we are working on a daily basis to optimize our efficiency in each of our production lines. But as well, we are working to what we call debottlenecking, which is working on our production lines to make sure that we are pulling as much as possible from our capacity of the furnace. And the job which has been done in the past month is leading to additional -- an additional capacity of 90 million of bottles for all the segments, and this will be beneficial for '23 at least. And then a quick update on our new technologies, which are key for CO2 reduction road map. So we are on track, first, with the electrical furnace that will be launched in Cognac. We are planning the first production by the end of this year. And our hybrid furnace, which will be located in Zaragoza. Here again, project development is on track, and we plan to start at the end of '24. Jacutinga has been launched -- was launched at the end of the year, as was it was planned. So it's a big success, and I would like to congratulate the teams which have been working day and night to make sure it was at a rendezvous. So this furnace is going to be focused on long-run beers and spirit production, which will increase our capacity on Emerald Green bottles in Brazil. So this is obviously -- this furnace is fully loaded, let's say, today with some key customers and extra capacity have been allocated. So you see the numbers. So CapEx for this furnace initial target was EUR 60 million. We are just meeting this number. So very good project management on time, and we're going to get this additional capacity of a little bit more than 110,000 tons per year. So again, congratulations to the teams who have been able to make that real. One of the key topic we'd like to share with you is everything which is related with ESG. You know that we have put ESG at the core of the company, the core of our strategy. So our objectives for 2030 have been validated by the SBTi. We are now part of the CAC SBT 1.5-degree index, which is an index which focus on climate. And so we are part of that. And then we are quite proud of the latest ratings, which have been upgraded. So first platinum medal with Ecovadis, meaning that we are among the top 1% company, among 90,000 companies, so this is a nice reward for Verallia. CDP, we got an upgrade of our rating to A-. And MSCI as well, we got this upgraded to BBB. ESG is obviously results as well, and we are focusing on 2 key KPIs. The first one is CO2 emissions. So in 2022, Scope 1 and Scope 2 has been reduced by 2.7%, which is finally minus 10.8% compared to 2019. So we are totally on track with the road map we have defined, which will lead us to reduce by 46% in 2030. Another key KPI is the usage of external cullet. So we reached in '22 55.7% in '22, plus 0.7 points compared to '21. And here again, we are on track on the road to meet our objective of 59% in '25 and 66% in 2030. Verallia is also about creativity, focusing on high added value products, meaning premium. And here, you have a clear demonstration of our activity. This is just a few examples. But you see in each of our country, we have some quite successful story. For instance, take Spain, we have launched the lighter bottle we can find on the Cava, and we are able to reduce by 125 grams this bottle compared to a traditional one, can speak about as well the successful story of the Prosecco Rose in partnership with Vera Wang. So this is really something that we are aiming to keep on pushing because we are very convinced that it is additional services to our customers, and this is something we want to be in. One of the key moment of 2020 was our acquisition of Allied Glass, that is now Verallia U.K. So we confirmed in November the closing of this operation, and it is a key operation for us, a strategic operation for us, first being the first one for Verallia. And second, because it is totally aligned with our strategic view. So here, it means that now we are competing our geographical footprint being present in U.K. 2, this is -- Verallia U.K. is a leading company in the premium glass. So obviously, we see a lot of upside. And the integration is ongoing, going well. And obviously, we have started to work on all the potential synergies and remaining in the way we want to do business is -- which means glocal, what I call glocal, it means that U.K. is in charge of the U.K. business, but being glocal, Verallia U.K. will benefit from being integrated in Verallia from some economy of scale, obviously, on purchasing side, but as well on R&D and technology support. So in a nutshell, our 2022 results are quite good, let's say, very good, and I'm very satisfied about what we have been able to deliver, thanks to the agility and determination of the teams. So for revenue, so we have a revenue growth of plus 25.3%, so more than EUR 3.350 billion, adjusted EBITDA, EUR 866 million, so plus 27.6% compared to '21, with a margin which is improving compared to '21 at 25.8%. Net income reached a growth of plus 42.7% to EUR 56 million. Net debt, so we are continuing to deleverage the company. So we are at 1.6 compared to 1.9 at the end of '21. Extra financial indicators, again, which are the core of our strategy, so I have just commented it. So we are on track. And the dividend, so we are proposing a dividend per share of EUR 1.40, which is a plus 33% compared to '21. So now I'm letting the floor to Nathalie, who is going to present in details our financial results.

Thank you, Patrice. Good morning, and good afternoon to all of you. Very pleased to comment these numbers for you again this month. So consolidated revenue for Verallia, so we ended the year 2022 at EUR 3.352 billion. As you can see on this page, the usual bridge. So we were at EUR 2.674 billion in 2021. That means an organic growth of 26.5% versus 2022 and 32.9% in Q4. You can see in the bridge that the volume impact is limited. We explained already that we would have reduced capacity in the second half of the year with the timing of our furnace renovation. So this is perfectly in line with our expectations. Now the price and mix pillar is the most contributive one. In Europe, we have run several price -- selling price increases during the year of 2022 to compensate for the sharp inflation in production costs. And in Latin America, we do that, as usual, with a dynamic selling price variation. Important to note that the mix contribution has been positive throughout the year and in all the quarters. If we move by product categories, the volumes have been pretty strong, especially strong in spirits and also in sparkling wine with continued recovery in champagne, reaching new records and in sparkling wines in absolute. And we have solid volumes in food jars as well. Now you see that the FX pillar is negative. This is mainly due to Argentinian peso and to a lesser extent to Ukrainian hryvnia. And we are very pleased to introduce a perimeter impact, now the EUR 17.5 million that you see in this bridge is the consolidation of Allied Glass in the U.K. This is a bit more than 1 month activity only. So in the 2022 figures, Allied contribution is very limited, still, it will be, of course, effective in 2023. So if we move by regions, in South and West Europe, the revenue evolution has been 22.1% reported. We have flat volumes despite the 4 furnaces renovations in H2. And we've seen here very strong the spirits and the sparkling wine that I just mentioned and a very positive mix, especially in Italy. If we move now to North and Eastern Europe, still important to note that U.K. is included in this region, in this segment of North and Eastern Europe, and it contributes to 3.2% in the growth. That is 29.3%, as you can see. We have a slight increase in volumes, and it's important to mention that it is despite the volume drop in Ukraine, you know that in Ukraine, situation for Verallia is unchanged since we had our last call together. We continue with 1 of the 2 furnaces running. And I have to say here that our team in Ukraine is very strong, very committed and doing an outstanding job throughout the year in '22 and supportive, of course, to our customers. So in North and Eastern Europe, also strong in spirits, but also in still wine, and we've seen growth in beer and food jars. If we go to Latin America, you will see that figures for Latin America are, again, very, very strong. We have plus 38% of reported revenue. We have -- and it's plus 60% at constant exchange rates. The sales volume continue to be really strong in all the segments, I have to say, especially beer, spirits and sparkling wines. And we've seen significant increase in selling prices to follow the inflation. You know that in Latin America, our spread is positive in each and every country, which is, again, a very strong achievement of our teams there. And we have successfully launched the new furnace in Jacutinga, as Patrice said, exactly on time. The contribution to the volume is still, of course, very, very limited. You remember it was really started to have good glass in December, but exactly on time. And so again, this will be a contribution to 2023. If I move now to the consolidated adjusted EBITDA bridge, the usual format. We had an EBITDA -- an adjusted EBITDA of EUR 678 million in '21, and we achieved EUR 866 million in 2022. In terms of margin, you have them on the right top corner, we moved from 25.4% to 25.8%, which is a strong achievement as we succeeded into compensating for the dilution of the price increases. You can see that our 3 pillars contributed positively to this performance. So the first one is activity and operating leverage. So here, we have had flat -- overall flat volumes throughout the year and the positive impact is mainly coming from stock variation and valuation. The second pillar, the spread is the most contributive as you can see. So progressively throughout the year, and we commented that to you each quarter, we have been able to offset the cost inflation in all the geographies. And we have also a positive mix contribution throughout the year in each of the quarter. One important point is about Q4. We have especially strong spread in Q4. But remember that a comparison basis here is important. In Q4 2021, we had a negative spread as we had started to see a strong inflation in energy costs and customer prices were not yet adjusted. So we have a comparison effect here. If we look at the net PAP, so we are pleased to report that we succeeded to deliver 2.1% of cash production cost reduction. You know that our target is to deliver at least 2%, and we had a strong Q4 here. So very good performance throughout the group. The exchange rate effect is negative, and this is mainly due to Argentina. And in the EBITDA margin, important to insist that there is a country mix effect and a region mix effect, I should say, as LatAm performance is strongly contributing. So I will show you now the regions. EBITDA in South and West Europe moved up from EUR 453 million, up to EUR 555 million. That is plus 22.5%. And in terms of margin, you can see that we are pretty stable, even a bit above 24.8% to be compared to 24.7%. So here, we have a positive inflation spread, as I commented. The product mix was strong and the industrial performance was good as well. If we move to North and Eastern Europe, so here, U.K. is included, but has really no impact in 2022, as I was commenting. Remember, the acquisition was on the 8th of November. So the EBITDA moved from EUR 117 million, up to EUR 147 million. That is plus 25.1%. And the adjusted EBITDA margin, 21.1%. That was 21.8% 1 year ago. The positive inflation spread on sales is due to the rise in costs here as well. We have industrial performance in line. Important to mention that in an year, we have Ukraine, and this is impacting the comparison versus last year. But our Ukraine team succeeded into delivering a positive EBITDA throughout the year, so really a strong performance. And one specific point to mention, we succeeded into delisting our subsidiary in Germany, so Verallia Deutschland AG. The privatization was finalized in December. So no impact in the EBITDA, but important to mention. This is actually less admin work for everyone, and it didn't make sense for us to keep this listed company. If we move to Latin America, so the performance is -- continues to be really very strong, EUR 108 million EBITDA in '21, moving up to EUR 165 million, that is plus 52.1%. And if we look at the margin, we are moving from 35.6% in '21, up to 39.2% in 2022. So here, I think this is always my comment, but our 3 pillars deliver fully. We have strong volumes, and we addressed this growth. It will be even more valid in '23 as we start our -- we benefit from Jacutinga 2, and we work on Campo Bom capacity. We have a positive inflation spread, and the industrial performance is really excellent in the region. Moving now to CapEx and cash. So CapEx evolution, we moved from EUR 256 million to EUR 367 million CapEx. As you can see on this graph, in fact, the recurring CapEx were maintained at 8% of sales, and we see that strategic CapEx are moving from 1.4% to 2.9%, and this is fully addressing our strategic road map that is adding capacity to follow the market growth and in the most profitable geographies. So we have the building of the new Jacutinga furnace in Brazil. The first investment linked to the new furnaces coming in '24 that is Campo Bom in Brazil again and Pescia in Italy. And we continue the rollout of our CO2 emission reduction CapEx, that is EUR 22.8 million in the year. If I move to the cash flow generation for the year. So you can see free cash flow has increased from EUR 329.3 million in '21, up to EUR 363.8 million in 2022. You can see that, okay, we start with the adjusted EBITDA, we just commented. The total CapEx I commented as well, and the increase again is mainly due to strategic investments. We have the change in operating working capital that is EUR 39.4 million, including mainly CapEx this year variation. We had a strong road map of CapEx in the Q4 that is explaining this EUR 75.2 million of CapEx this year variation. And overall, I have to say, we have very good control of our overdues and inventories. Other impact, you have the usual IFRS 16 impact mainly. And to remember that last year, in the EUR 39.8 million, we had some specific CO2 effect at the end of the Phase III. So you know that already. If we comment the interest paid and other financing costs, the cash out higher in '22 is mainly due to, in fact, a foreign exchange impact and the cash tax is increasing in line with our better results. So all in all, a strong free cash flow generation for '22 again and perfectly in line with our midterm guidance. Looking now at the net debt and the leverage. So the net debt is EUR 1.406 billion, I would say. And the leverage is 1.6x. So this is after 2 elements that you have after the free cash flow I just commented. So EUR 123 million dividends were paid in 2022. And we have the acquisition of Allied that was paid and paid cash for GBP 315 million EV. If we move to the financial structure and liquidity next, nothing major -- no major change versus previous quarter. You know our well-balanced financial structure between bank and markets. We have -- we enjoyed 2 sustainability-linked bonds with fixed rates that you can see on this page at a good level considering the current market level. And so all in all, the cost of financing for '22 remained below 2%, all included. And the available liquidity is now EUR 680 million after the acquisition of Allied in the U.K.

Okay. Thanks, Nathalie, for these detailed information. So obviously, '22 is behind us, and now we are all focused with the team on '23 to keep on delivering profitable growth, along with the implementation of our ESG road map, which is again clearly put at the core of our strategy. So for 2023 financial guidance, given a market that we still expect to remain supportive in Europe and Latin America, we are looking for revenue growth above 20%. And we are shooting for EUR 1 billion EBITDA for '23. So adjusted EBITDA, we are taking the ambition and will be around EUR 1 billion. So this is what we wanted to share with you. I'm sure you have some Q&A -- questions, sorry, and we'll bring the A. So let's move to your questions. Thanks.

[Operator Instructions] We'll take our first question from Matthias Pfeifenberger from Deutsche Bank.

So a couple of questions from my side. On the 20%-plus growth, can you split that into -- obviously, we can do the math on Allied, but can you split it into debottlenecking, Jacutinga price, most importantly? And then maybe underlying market growth, you hinted, maybe, I don't know, 2%, 1%, 2%. Second question on the margin. So obviously, the guidance implies much dilution. You're doing probably more price increases. How much of it is from down trading or looking at 39% and LatAm being not sustainable. So just what is the driver for the margin dilution? And then on the gas hedging, I think you have eliminated the slide on the rolling hedging. Do you still do the rolling hedge? What's the position for '23? And how does that compare to competition? So what does it do to your competitiveness in terms of pricing?

So first of all, speaking about growth for '23, speaking for growth for '23. So obviously, we are looking to go along with the market growth, which is being cautious 2%, but we can imagine it could be 3%, between 2% and 3%. So on top of that, and Jacutinga will be part of it as well as the actions we are taking on a daily basis, efficiency, debottlenecking and all of that, plus a perimeter. So coming from Allied plus some mix impact. You know that we are very willing to keep on developing a high added value product and working on the optimization of our portfolio. And in Europe, we have a good job ongoing on that. And then the rest will be the pricing effect with some pricing, obviously, carryover from '22 to '23 plus some additional pricing that we'll have to do. You all know that we have a clear policy, clear strategy, let's say, which is to deliver a positive spread. So this is how we see our revenue growth in '23. About margin...

I can take it. So margin dilutions, you were asking, is it coming from down training or LatAm. I think the main contributor is, again, the price effect and dilution from increasing pricing or carryover effect as Patrice mentioned, to the margin to ensure a positive spread. So we have a very strong margin in Latin America. But with Jacutinga, of course, we are adding some fixed costs, and we will have the ramp-up of Jacutinga 2. But except for that, we do not see any down-training -- down trading or strong effects in Latin America. You have seen that Latin America has remained very strong throughout the quarter and the year. So I would mention mainly the dilutive effect from price evolution.

About gas hedging, Matthias, maybe you missed it, but the slide is still in the presentation in the appendix, so go check.

Okay, sorry.

No problem. No change about that. We are still very disciplined with this policy because, again, as you know, this is a tool which is -- we are not traders, as we said. So we don't want to play with that. This is a tool which is giving us visibility, this is a tool, which is allowing us to anticipate and put in place some actions when it's necessary. And this is a tool which is allowing us to share that with our customer visibility and protecting in a certain way our customers benefiting from our cost well known, I mean, on the energy side. So for '23, we are in the same configuration of '22. We are entering in '23 with 85% of our needs hedge, and the rest will be by the market value. And we do not expect really the negative impact compared to spot market from what we see today. But again, with the 15% that we need to get, we'll see.

Okay. So you're not necessarily hedged above spot prices that is that what you're saying?

We are not giving the level of hedges. So we don't give you.

Let me put it another way, are you impaired in your ability to raise prices by being hedged as much?

No. I do not think so. I think what we need to look at is much more a cumulative approach between '22 plus '23 because thanks to our hedging policy, we will be able to be resilient and to share that with our customers, and this is a cumulative approach that you need to look at.

We'll take our next question from the line of Francisco Ruiz from BNP Exane.

Congratulation for the figure as well. I have some questions on the modeling and another question on more strategic. So on the first one, the net debt book on Allied, if I look at your cash flow statement, looks relatively lower than the figure that you reported of EUR 315 million. It's just because you are booking the -- only equity value? Or is -- because there are some other payments to be included? The second question is on financial cost. So there has been a big delta on financial costs in the second half of the year. What I would like to know is it is just the effect of the high interest rates during this part of the year? Or there is some one-off on how we should understand financial cost for 2023? A follow-up on Matthias' question, could you give us an idea of how much Allied should contribute to this EUR 1 billion EBITDA on '23? And what's the FX that you're assuming for next year guidance? And last but not least, is on pricing. I mean you commented that there has been some price increases. Could you be a little bit more precise on this? And how reassured you are that in this context of energy going down, the prices in the second half of the year will be maintained?

Thank you for your question. I'll take the first one. So Allied, I think you referred to the free cash flow details in our -- in the press release. In fact, you are right. So here, you have a line that is acquisition. And here, you have a net of different topics, plus it is indeed only the equity, and then we had also some cash out for the debt related. So all in all, the cash out for the impact of Allied in our cash was around EUR 400 million. And in this line, you have the equity purchasing -- purchase for Allied and but it is netted also from other elements. So that's why you don't see exactly the figures, Francisco. Then going to the financial costs for H2. If you remember, our interest rates, we are very well protected against the current increase in interest rate as we have now 2 sustainability-linked bonds with fixed rate. And we are also -- we've hedged on the rest of our long-term debt. So the main impact is coming from, in fact, foreign exchange impact, and it's pretty one-off. So if we go to '23, we will continue to benefit from, of course, our sustainability-linked bonds with fixed rates here. And we have a partial hedging on our long-term debt. And then the factoring is not hedged, of course, and we have the refinancing. But we will not be hit by the -- as strong as the market -- as the current interest rate level that you can see, I would say, on the financial markets.

But could you give me the detail on the balance sheet factoring?

The detail, what do you mean...

The figure.

Yes, it's -- let me search. It's around the same magnitude of previous year. So we continue to roll our usual program. And at the end of December, the total factoring was EUR 335 million.

About your question on Allied, which is Verallia U.K. now, I mean, contribution in the EBITDA for '23 is going to be around EUR 50 million. About pricing, what you have mentioned on your question about pricing, I would like you to just keep in mind that we have our clear strategy, again, which is to be a spread positive. So it means this is our commitment. This is what we are going to work on. And what is to be noticed is that '23 as far as spread is concerned, we're going to have a totally different profile as the one we had in '22. In '22, we started with inflation on our costs. And then we were, let's say, running, if I may say, for selling price increase. And you remember that we did several steps Q1, then in Q2 on the case by case at the end of the year. So obviously, it's going to be a basis for comparison. And when you enter in '23, it's going to be the opposite. We're going to see the spread which is going to be, in my mind, a strongly positive in Q1 and then certainly going down due to the basis comparison at the end of the year. So we are going to monitor pricing accordingly to this positive spread strategy. And having in mind as well that we want to protect our long-term relationship with customers. So all of that, I mean, is a nice balance, good discussion. And as we have always said, we want protect our future. So it's a question of protecting our future, our competitiveness at the end of the day, but with our golden rule of being spread positive.

But Patrice, some of the competitors has already commented on 15% to 20% increase in prices overall for the year. Are you agree with this figure, and this is what we should understand for Verallia?

Sorry, Francisco. I do not comment anything about competition on that.

We'll take our next question from Michele Filippig from Jefferies.

Congratulations on the results. I have 2 questions, some items that has been already touched, but maybe if you can add some color. The first one is on the cost outlook. Because according to your 2023 guidance, if we take a revenue higher by 20% and EBITDA at EUR 1 billion, we have operative cost in 2023 higher by more or less 20% year-on-year. And I appreciate you are just in February, and this can change a lot through the year. But can you help us break down this cost inflation? Is it mostly due to energy hedges rolling down? And what is the direction of travel for the other cost items, for example, raw materials? And then the second question is on price dynamics. And I understand that, as you just said, the main driver for you is your price cost spread. But energy spot and also forward prices are correcting. So my question is, when do you expect to give back or moderating some prices? And if you comment on that, probably not -- do you see some of your modern edge competitors, starting to increase prices less than your -- even moderating in 2023 due to lower energy cost as said.

Thank you, Michele, for your questions. So you're very good and you're right about your assumption on the total cost evolution that we see and thank you for saying as per today because I think we all agree that there is still a lot of volatility in the market and lack of visibility in the evolution of inflation. So -- but you're right, about around 20% -- now if we look at the nature, the cost nature, we will still see energy increase versus 2022. And we have also a component that's something we mentioned already for 2022 in the raw material. We have also inflation here on -- especially on the [ collect ] side. We see that collect prices in some countries. So it's very different by country. But we see inflation in the collect prices versus previous year. We have also around 20% of our cost base that is labor cost, and there is inflation expected in '23 versus '22 in labor costs. And important to say that we do not see deflation in fact, in many of our cost nature, we would say we see some ease in the inflation on the packaging, on the transportation, maybe on soda ash as well, but we do not have in the components of our costs that deflate versus 2022 as per today.

I think this is, Michele, an important point, this one. What we see in front of us and with all the humility obviously in this volatile environment is that we do not see a deflation. We see an inflation which is going to slow down. My guess is that could be still similar to '22 in the first part of the year, and maybe we'll see a slowdown in '23. And for what we see for '24 right now, we do not see any deflation. So I -- and again, what is important in our keyword is agility and adaptation, and we will manage what we have to manage, again, being responsible for the company, protecting the profitability, again, with this golden rule of spread positive and this is it.

Very valuable comments. And do you have any comment on the price dynamics question by any chance? I can repeat the question.

Yes, please.

Yes. So we said before that like your main driver moving basically your price negotiation is your spread. And as you just said you will have extra inflation from the energy rolling hedges, but we also like seeing the spot and the forward prices for energy, correcting from the high of 2022. So my question is, when do you expect to get back prices probably from 2024? Or do you have any view on that?

This is what I have just commented so far, I do not see any deflation in our costs. So -- but again, very humble about it, very humble about it, but we see cost inflation slowing down in the second part of the year and maybe to be maintained in '24, but very too early to be definitive, obviously. So that's why I was saying that keywords or agility and adaptation and being reactive in other. And again, our master golden rule is spread positive, so how we are going to manage that. And we have the mix that we are working on as well in order to support this objective.

We'll take our next question from Jean-Francois Granjon from ODDO BHF.

First question, I just want to come back on the EBITDA same level at 26% for the EBIT margin. And we see a strong improvement by more than 200 basis points for the EBIT margin to which more than 25% compared to 23% for the previous quarter. So how -- can you explain this so huge increase despite the dilutive impact of the price increases? My second question concerns the price increase expected for 2023. I understand that you want not to comment the competitors explanation. Nevertheless, I understood that you probably could increase by -- in the same magnitude at 20%, the price in '23 versus '20 -- compared to '22. So I'm just wondering, do you consider that your expectation at 20% growth for the top line is probably cautious, taking into account the price increase, probably some more volume. And for sure, this got impact. My third question, could you [ comment ] a bit on the CapEx amount, what do you expect for the CapEx in 2023? And the last question concerned the plan for 2024 presented a few years ago. Do you expect to make an update on the planned 2024, most specially in terms of EBITDA margin, you expect, if I will remember, between 28% to 30%, but it was previously in the inflation impact. So do you expect to make a bit of the plan for the medium term?

Thank you, Jean-Francios. Nathalie, you take the first one?

Yes, I will comment to you the -- hello, Jean-Francois. Thank you for your questions. So on the EBITDA margin in Q4, indeed, it was really strong. We have here 3 comments. So I commented -- and if you compare to previous year, I commented to the spread, if you go back to Q4 2021, we had a negative spread. And we didn't update customer prices in Europe. In 2021, if you remember, there was one price increases annual one. And in Q4, we had inflation hitting pretty strong, and it had already started inflation in July 2021, but energy prices started to rise already in Q4 2021 before the Ukraine conflict. And if we move now to this -- in 2022 spread, here, we have the dynamic of the several customer price increases that we did in Europe. And on the contrary, there was a bit of a lesser inflation or slowdown in inflation in Q4, let's say. So that is one important component. And also the net PAP the net productivity, sorry, with the net PAP, we did deliver a strong performance in Q4. And you know this one is really benefiting to the margin because it's adding euro to the EBITDA and no impact on the top line. So this is a good news, and we are pleased to deliver that. And then I can add there is the mix in the country -- in the geographies with the increased contribution of Latin America step by step.

Okay. About our guidance on revenue, Jean-Francois. So we are seeing above 20%, and we are seeing above. So, we are...

A lot to go.

I mean, we are just -- I mean in February. The world is much -- is always uncertain. So we have a plan, obviously, to deliver growth, so we said above 20%, and it's going to be a blended -- a blend of volume growth with the additional capacities with obviously the perimeter as well coming from a line with pricing and with mix. So this is what we see as of today. And it is a commitment that we are clearly putting on the table above 20%. About the CapEx for '23, we're going to be as per our guidance, midterm guidance around 10% and always focusing on developing some strategic investment, what we call strategic is everything which is related to our growth. So additional capacity with the announcement we have done and we have 2 new furnaces to come in 1 in Brazil and 1 in Pescia in '24. And as well, focusing on executing our CO2 emission reduction road map. So we're going to be around 10%. For your question about our midterm guidance we presented at the Capital Market Day at the end of '21. I mean, I would tell you that we are on track on every key KPI. We are ticking the box. There is one, obviously, which is a challenge is the margin, the 28% to 30% margin due to the fact that the market environment is totally different coming with this inflation environment. But the implicit EBITDA value in euro, I mean, is going to matter. It's still going to -- it's our commitment on that. So do we have to update this 28%, 30% margin? I mean, this is something we're going to work on at a point of time and come back to you after certainly having delivered '23 and having a good view of '22 plus '23 and an estimate of '24. But what is much more important in my mind, at the end of the day, is that the euro absolute value, which was behind is going to be delivered.

[Operator Instructions] We'll proceed to our last question, Guillaume Muros from Societe Generale.

And I have 3 for the last -- I mean some follow-ups, but as well, 2 questions on ESG. The first one, it's on the North and Eastern Europe region, more specifically, and we're seeing some volumes growth. And as you said, despite the crisis, energy, but also war going on there. Could you specify a bit where is this volume growth coming from? Is it from debottlenecking capacities and/or underlying demand growth? That's the first question. And then my second question will be on ESG. Could you give a bit of a view on the outlook from glass versus other materials at the end of 2022 and 2023, particularly regarding the decrease in some raw materials for some substitutes to glass during the end of the year? And the third and last question is regarding your furnaces energy consumption, more specifically. And so you commented on fuel transition for the first half 2023. Could you give some color there? Do you expect this temporary fuel transition to last a bit longer during the year? Are there some gas shortages as well, what kind of CO2 emissions should we expect in 2023 related to 2022 because of this fuel transition? And last question I had for -- last question is on the rationale for the technology of the 2025, 2026 furnaces in Spain and Italy. Why have you choose for the Spain furnace, for instance, the oxy-combustion technology instead of using electricity or hydrogen.

Okay. Like to take first one?

Okay. I take the first one. Hello Guillaume. Thank you for your questions. So in Northern Eastern Europe, I mentioned that there was some volume growth despite the one furnace less in Ukraine. It was not a sharp growth, let's be clear, but market was supportive, and it's not linked to any new capacity. I would say it's very stable. No specific investment in debottlenecking, we commented -- Patrice commented to you the specific impacting ones. So of course, we work on efficiency all the time in all our plants, but no specific point to mention here.

On your question about glass packaging market compared to other substrates, quite difficult to answer to this question, Guillaume. We -- I mean we do not have a latest information. So obviously, we are quite willing each time with our business intelligence team to get additional data. What I would like to remind you is that you remember that in 2021, glass packaging in Europe was a record with 23 billion tonnes of glass compared to the past. So it was a forever record. I have just commented with the little data we have from the FEVE, European Federation of Glass. But H1 '22 was strong again, because after a best ever in '21, H1 in '22 is 8% in tonnes and 8.5% in units above '21. So -- and so we see a market which is very dynamic in glass. About substitution, quite difficult again to answer to that, maybe in some marginal cases, but we see as well the opposite we see and we see with some customers, especially the ones who are willing to position their product on the premium side, moving from some other substrates to glass packaging, especially on the food side, we see that happening. About energy, you're right, we commented last time that we were ready to operate with some additional fuel. And the objective of that was really to ensure business continuity in an environment where shoppers could be at the door. So -- and as commented last time, we decided to anticipate to be prepared on the technical side, but as well on the supply chain side to use some fuel. So we have ramped up in Q4. I gave you a value of 20% of fuel usage. We know the current situation. I think the shortage is not likely, likely scenario. For this winter, at least, we're going to see what is going to be the situation next winter. So we have started to use this fuel in Q1. And we are going to ramp down quicker than what I was commented. It means that I will not use 20% of fuel during the overall first semester. So this is what we are -- and here, you see this is all about what I was mentioning, agility and adaptation with the current world we are facing. For your question about the furnace technology for 2025, I think what we have decided is to use the best technology, which is fully, I would say, not validated, but to fully proved -- we have launched because we are speaking about '25 here. And we are launching our electrical furnace in '23 and our hybrid furnace in '24, an hybrid furnace is going to be for colored glass. And '24, so it means that we're going to get some experience some time to value and validate all of that. So it means that we need to make a decision right now of the technology, and it was the best decision to move for spend for oxy-combustion because it's going to be a color furnace. So hybrid furnace will not be totally and fully validated. So this is why we have decided to go with oxy-combustion on this one to be as soon as possible, ready to have this additional capacity in Spain.

Just one small follow-up on the CO2 emissions in 2023 versus 2022. So I acknowledge that you're going to decrease the fuel usage quicker than initially expected. However, should we expect an absolute increase in CO2 emissions in 2023?

So we -- in fact, we will not increase the usage of fuel. We will decrease. It was really a fuel usage was to be prepared to any shortage if we would have. And as we do not see the risk anymore, as we always said, we will be agile and go back to a more normal meeting to be clear. And then -- so all in all, as we included a portion of fuel, and we are not now decreasing in the end, the total impact is very limited to additional CO2 emissions.

We'll take our next question from the line of Fraser Donlon from Berenberg.

Congratulations on the results. Just 2 questions from my side. Obviously, with the guidance, which was given at the Capital Markets Day and absolute value you're kind of expecting to be, I think, well above that in 2023. So I guess my question is, do you view 2023 as a super normal year for Verallia? And where is your comfort level in terms of like what's a sustainable level of EBITDA or whatever to show to your customers? And then the second question was just I would kind of be interested to have your assessment of the capacity which is coming online in European glass. You've obviously announced some yourself and some in Belgium, U.K., like how do you see that relative to the demand growth in the market, let's say, between now and 2025?

Thanks a lot for your questions. I don't know what you call a super exceptional year or whatsoever. For us, we are on the road of profitable growth. So it means that we do not foresee '22 and '23 as extraordinary year, we see that as a path to keep on growing, keep on developing the company and make it profitable. So at a point of time, I will come back to you to present a new strategic plan. Too early to make an appointment today, let's say. But if '23, we are delivering what we have committed, obviously, I will be back to you to present what is our next steps for maybe up to 2030, but we will come back on that. So bottom line, we do not see that as an exceptional year. We see that as a good year. We are delivering on our commitments. And this is a path that we want to keep on taking. And if we have announced lately some additional capacity for '25 and '26, especially in Europe is because we strongly believe that we have a path for that. And this is a clear demonstration of how we want to grow faster and make the company even much more profitable and delivering much more EBITDA euro. About capacity. So I have commented the expected growth of the market. We are cautious with the plus 2% compared to an historical 2.9%. We just see the figure of '22 in H1, which were stronger than 2021. And the additional capacity, which has been announced for me are just running after the market growth. So we still see a tight supply environment, at least for the next 2, 3, 4 years.

[Operator Instructions] There are no further questions for now. I will hand the call back to your hosts to conclude today's conference.

Thank you very much. I think most of the question on the web have been already answered. Maybe just one question from Inigo. How is the Allied Glass acquisition evolving? It's probably more about integration. And another one from Inigo as well. Why are you assuming that the market will grow less 2% versus plus 2.9% over the last few years. The others have been really answered.

Thanks, Inigo, for these 2 questions. So about Verallia U.K., the integration is progressing well. So first of all, since January 1, it's not any more Allied, but Verallia U.K. And we are -- we have an integration plan, making it topic by topic, priority by priority. And they were already quite autonomous. And this is a philosophy we have on the business. So for me, this is how they keep their autonomy, how they are able to deliver the growth they have been able to do to demonstrate in the past year, so to keep on going that way. And obviously, being part of Verallia, how we can support them and give and provide some synergies. And the obvious one or everything which is related with purchasing with our purchasing power being part of Verallia U.K. being part of a bigger group. And 2, everything which is related to industry or industrial CapEx, technology side. So it's moving in the right direction at a good pace, but with a very, very positive mindset. So I'm very glad about it. About market when it comes to market provision by definition when you forecast you're wrong. So we have the data from the past years. And you're right, 2.9% growth. We have stated maybe in a cautious way, 2% minimum, and this is what we are working with making sure that any capacity we are going to put in place is going to be fully utilized. So this is what we are -- this is why we have taken 2%. Okay. I think we have no more questions. So thanks a lot for your time, hope all the information we provided -- we've just provided were clear. Please have a good day and see you. Take care. Bye-bye.

Bye-bye.

And this concludes today's conference. You may now disconnect.