Vidrala, S.A. (VID) Earnings Call Transcript & Summary

Good afternoon, and welcome to the conference call organized by Vidrala to present its 2026 third quarter results. Vidrala will be represented in this meeting by Raul Gomez, CEO; Galo Alvarez, Chief of Sustainability and Corporate Development; and Unai Alvarez, Investor Relations. The presentation and the Q&A session will be held in English in order to facilitate understanding of everyone. In the company website, www.vidrala.com, you will find available a presentation that will be used as supporting material to cover this call as well as a link to access the webcast. Mr. Alvarez, you now have the floor.

Good afternoon, everyone, and thank you for taking the time to attend today's call. Earlier this morning, Vidrala published its results for the third quarter of 2026. Alongside these results, we have made available a presentation that will serve as a guide throughout this call. We will start with an overview of the key figures released today, followed by a closer look at the new share buyback program we are proud to announce today. We will then share some closing remarks on the quarter before opening the floor to your questions. So before we walk through the key financial figures, please note that the business acquired in Chile has been consolidated into our results from 1st of January of 2026. To ensure comparability, we also present like-for-like figures with 2025 restated on a pro forma basis to include the results of the acquired business. During the first 9 months of 2026, we obtained revenues above EUR 1,146 million and EBITDA above EUR 338 million and net income equivalent to earnings per share of EUR 4.99. Free cash flow generation remained solid over the period, allowing us to further reduce net debt to EUR 200 million at the end of September of 2026. This represents a low leverage ratio of 0.4x last 12 months proforma EBITDA. Let's take a closer look at revenue. This chart shows the year-on-year sales rates on a comparable perimeter basis, leading to reported sales of EUR 1,146.5 million. Organically, at constant currency and on a like-for-like perimeter, sales declined by 3%. This reflects the anticipated price adjustment of 1.2%, where volumes continue to show a gradual and sustained improvement, supported by a robust performance in South America. Moving on to the next slide. EBITDA for the first 9 months of 2026 reached EUR 338.5 million, reflecting an organic variation of minus 0.5%. This performance underlines the resilience of our industrial model and the benefits of our geographical diversification strategy in a challenging macroeconomic environment marked by persistent inflationary pressures. This operational performance delivered a strong EBITDA margin of 29.5%, up 27 basis points year-on-year as we further strengthened our profitability in an adverse market context, reflecting the disciplined execution of our cost control initiatives and the structural competitiveness of our asset base. We now turn to sales and EBITDA evolution by business unit, Europe, U.K. and Ireland, and South America, which includes operations in both Brazil and Chile. As anticipated, we navigated a still weak demand environment in our European mature markets, while South America delivered a strong performance, underscoring the value of our geographical diversification. Across all regions, margins remained resilient, supported by our ongoing footprint optimization and a disciplined cost management, further announced by an ambitious, restrictive investment program. I will now hand over to Galo, who will take you through our balance sheet position.

Thank you, Unai. Let's have a look at the evolution of our financial position. Net debt stood at EUR 201 million at the end of September, 0.4x last 12 months pro forma EBITDA. That is EUR 51 million lower than in June, and it compares with a peak of EUR 273 million in March after we paid EUR 75 million of enterprise value for Vidrala Chile. Free cash flow over the first 9 months was in line with our expectations. As every year, our cash profile is weighted to the second half. So we remain on track for the full year figure of around EUR 200 million. We generated that cash while running an investment program that is by -- designed above historical levels. We have chosen to invest countercyclically when others were holding back. We are accepting higher CapEx today to secure structurally lower OpEx for years to come. Let me repeat the logic behind this. Customers choose us because we serve them at the most competitive cost. That cost position sustains margins and cash. We reinvest the cash in a broader, better invested footprint, which further lowers our cost and strengthens our customer offering. And the balance sheet lets us do all of this while returning cash to shareholders. Turning now to shareholder remuneration. This chart shows the consistency of our distribution policy over time. Vidrala has raised its dividend every year and 2026 extends that record. Dividends paid this year totaled EUR 62 million, up 15% on 2025 after adjusting for the bonus share issue completed in November 2025. The buyback program in progress covers 3% of the share capital up to EUR 90 million, and these shares will be redeemed. Today, we announced a new program for a further 1% of the share capital, up to EUR 30 million, also for redemption, which will start once the current program is completed. This new program adds to the dividend and keeps shareholders at the center of our strategy. It reflects our confidence in the business and its long-term prospects, and it fits our capital allocation discipline, returning cash to shareholders while continuing to invest in growth. Taken together, dividends and the 2 buyback programs amount to EUR 182 million committed to shareholders in 2026. This is a deliberate effort this year, and we make it from a leverage of 0.4x, while keeping the investment program intact. It reflects our confidence in the business and in the cash it generates. Finally, let me turn to the outlook for the full year. 9 months in, performance is consistent with what we told you in April and July. So we reiterate our 2026 guidance. First, EBITDA of around EUR 450 million, consolidating operating profits and margins despite the macro conditions and intense competition. Second, EPS growth above 5%, supported by operational performance, the earnings accretive contribution of our broader geographic footprint and the share buybacks. Third, underlying free cash flow of around EUR 200 million, excluding restructuring costs, while we complete our CapEx program. Raul, over to you for the closing remarks.

Good morning. Thank you, Unai. Thank you, Galo, and thank you all connected for your time in attending this call. Hope you appreciate the new timing of our conference calls and particularly you, South American -- our growing South American stakeholders. Well, our results today must be read in perspective. I invite you to look at them in context, so that I can explain the work we are doing and the future that lies ahead of us. Inflation is high and inflationary pressures are growing everywhere. Business conditions are tough, tougher than expected across the whole food and beverage industry, especially in Europe and probably across the whole consumer world. Even so, despite that, we have protected our margins. That is cost control and this is part of our culture. It is structural for us. It is the Vidrala DNA. And still, we chose to invest more than ever with a clear focus on our customers. For you, it will -- this will mean a well-invested industrial base, visibility regarding our capital allocation. This is how we manage our assets. We are basically doing things in advance, acting today to prepare for the future. We have also expanded into South America. It is not just a new region for us. It will make us more relevant to large global multinational customers, big thing for us. Together with our traditional footprint, the new Vidrala will gain market share and create value for our customers worldwide. In fact, our new international growth will benefit our traditional markets. We will see it. You will see it. Most important of all, our product, the glass bottle, the glass jar, today has a brighter future than ever. New markets, new products, new consumers. The world, as we see it, will prefer the glass. It will be the ultimate sustainable packaging material, much more competitive than in the past. As the industry rebalances, as capacity adjusts, this will benefit all of us, glass makers, brand owners and consumers. Finally, in our results made public today, it's clear, we keep on generating cash. Our balance sheet is solid, and our debt is under control, guided by our 3 main, critical business principles: customer; cost; and capital. This is why today, we confirm our guidance for the year. And this is the basis on which we are building the year ahead in a world that today offers a lot of opportunities for a company like ours. And finally, let me end saying that behind every number we have shared today, there are people, our people, highly talented colleagues worldwide, now united as one team under one Vidrala identity. I'd like to say that we are stronger together. And today, more than ever, the future belongs to us. Thank you very much.

That brings us to the end of our prepared remarks, and we will now begin the Q&A session.

[Operator Instructions] Our first question comes from Francisco Ruiz from BNP Paribas.

Can you hear me?

Yes Paco, we are hearing you perfectly.

Okay. So I have 2 questions. I mean, in this volatile environment that you have described, Raul, I mean, a key priority for you and mainly for other players is pricing for 2027. With the current inflationary tensions, how do you see pricing? And how do you see other competitors' situation which need to increase prices probably more than you? Do you think that it's going to be a substantial price increase next year? Or it's going to be mainly a flattening year? I don't know. I mean, to know your thoughts. The second question is on capital allocation. So, yes, I mean, I appreciate the great performance in terms of the shareholder remuneration, but there are several players under these financial difficulties which are closing and could be willing to sell assets. Do you think that the current opportunity is much better than in the past? Or do you think that these competitors will be able to go through out of slump without any disposal?

Thank you very much, Paco. Let me start with the pricing. Well, I won't speak a lot about our competitors, okay? Just please keep in mind that the competition is high. We are living in a highly competitive environment, and this is probably that is nothing but healthy for our customers, okay? I could speak about our customers today, but I won't, okay? But it is clear that inflationary pressures are much greater than we expected at the beginning of the year. Inflation is higher than we all imagined just a few months ago, much higher. And inflationary pressures are probably one of the most deficit factors in the short term for the food and beverage industry or for the consumer world. Therefore, even though this is probably a supply-driven inflation, we will, Vidrala, be forced and motivated to adjust our prices up. In our case, we will do so in a balanced and consistent way, seeking to balance our future and our present, our market shares, our customers' expectations and the competitiveness of our products, okay? We need and we deserve to regain market share, but we will keep our margins safe. We will make no mistake. We'll adjust our prices. We'll protect our margins, as we have done in the past. And we will do everything possible to keep operating commercially with this decline, building our solid competitive starting position.

Yes. So if I may add more color to this, Paco, we will, for sure, pursue a disciplined approach, as we have done in the past, which means we foresee no negative spread between prices and our own cost structure, which can be very different to the cost structure of our peers. So this said, we foresee prices growing at CPI levels in every region 2027.

And the second question is probably not regarding capital allocation. It's more regarding our approach to M&A. Well, it's very evident, we cannot avoid this evidence that the industry is undergoing a process of consolidation. We are very aware of what is happening in the marketplace, in our competitors. And I am convinced that this consolidation, whatever is the result of this, will be good for the product, for the industry, for our customers and particularly for us because it will lead to a more balanced situation. But that doesn't mean that we are to play a leading role in that process, okay? We know what our role is. We'll carry it with a strict discipline. We will never compromise our solid financial position because we consider it as a structural advantage of our business model. And you can be sure that we analyze and we will continue to analyze every job opportunity that can help us create value. But I know you know -- I always say the same, whatever we do, you won't be surprised.

Our next question comes from Enrique Yaguez from Bestinver Securities.

I have 3 questions. The first one is about the installed capacity in the sector. It seems that the capacity -- the capacity closure announcements made by some of your competitors seem to be coming to an end. Do you think that your main -- the situation in your main markets is now balanced? Or do you foresee the need of further capacity adjustments? The second one is regarding your U.K. business. I don't know if you could provide about -- an update about the restructuring process. I noticed also that you made a rebranding of this business unit. And the third one is a follow-up question about the M&A. Would you be willing to expand to new regions such as Africa?

Thank you, Enrique. Let me end with your final question, what a surprising question, Africa. We'll see. We'll see. Everything is on the paper. Everything is on the table. It's our obligation to analyze whatever opportunities that happen in the future. But again, whatever we do, we will maintain a solid balance sheet, and I promise you won't be surprised. Hope that is clear enough. Your first question is how we see capacity in the industry. I understand that you refer to how we see capacity in Europe, including the U.K. because South America is in a completely different place. I have the feeling that the industry is getting more balanced. But we will see the proof of this in the pricing dynamics that we are to start soon. As we said before, we have the obligation to adapt our prices to the new much more inflationary than expected environment. If we do this with success, that will be a proof of evidence that the industry is getting more balanced as we think. And the last question, and the question that I like more to answer now. Let me enjoy a little, this answer. The rebranding of Encirc in the U.K. should be seen as a further proof of our firm confidence in this business. For you, it should be -- simply mean that, an evidence. We are restructuring our competitive position in the United Kingdom. This is requiring significant sacrifices, which are being managed with strength and discipline by our people. Look at the stability of our margins despite the weakness in our sales and the inflationary pressures. And this is what will lead us to update the name change today. It is very intentional. It is not coincidence. And I hope it gives you a clear sense of how confident we are in the future. Vidrala U.K., a great business made up of great people in a great place with a great future. Welcome, Vidrala U.K. Congratulations to all our Irish and British people.

Yes, I would add then...

Galo?

If I may -- Yes, if I may, I would add that the ongoing operating restructuring and industrial improvement has made Vidrala U.K. and Ireland a much more solid competitive player in the country. In fact, we foresee that for 2027, Vidrala U.K. and Ireland will be the business unit of highest growth, both in volumes and results for 2027.

Can I make a follow-up question about the U.K.?

Of course, Enrique.