Ladies and gentlemen, welcome to the Ardagh Metal Packaging S.A. Quarterly Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Stephen Lyons. Please go ahead, sir.

Thank you, operator, and welcome, everybody. Thank you for joining today for Ardagh Metal Packaging's Second Quarter 2025 Earnings Call, which follows the earlier publication of AMP's earnings release for the second quarter. I'm joined today by Oliver Graham, AMP's Chief Executive Officer; and Stefan Schellinger, AMP's Chief Financial Officer. Before moving to your questions, we will first provide some introductory remarks around AMP's performance and outlook. AMP's earnings release and related materials for the second quarter can be found on AMP's website at ir.ardaghmetalpackaging.com. Remarks today will include certain forward-looking statements and include use of non-IFRS financial measures. Actual results could vary materially from such statements. Please review the details of AMP's forward-looking statements disclaimer and reconciliation of non-IFRS financial measures to IFRS financial measures in AMP's earnings release. I will now turn the call over to Oliver Graham.

Thanks, Stephen. We continued our strong year-to-date performance in the second quarter with 5% global shipments growth and 18% adjusted EBITDA growth versus the prior year, again, ahead of guidance. Our results were particularly driven by strong volume growth in the Americas, reflecting the strength of our customer portfolio with its exposure to several key attractive and growing categories. Our performance is a testament to the resilience of our business despite macroeconomic uncertainties with shipments growth reported across each of our markets. Global beverage can growth continues to benefit from innovation and share gains in our customers' packaging mix, and we still anticipate only a minimal impact to our business arriving from the tariff measures announced. Now looking at AMP's Q2 results by segment. In Europe, second quarter revenue increased by 9% to $615 million or 4% on a constant currency basis compared with the same period in 2024, principally due to volume growth and the pass-through of higher input costs to customers. Shipments grew by 1% for the quarter, driven by growth in soft drinks, offsetting some weakness in beer. Can sales in beer, despite outgrowing other packaging substrates, were weaker in the quarter, negatively impacted by adverse weather in certain geographies. Soft drinks saw good growth, especially in cans, not all of which we were able to follow, given constraints on certain can formats in the summer season. Second quarter adjusted EBITDA in Europe decreased by 3% to $77 million or by 6% on a constant currency basis, in line with our expectations, reflecting headwinds related to input costs. This included a temporary impact related to metal timing given falling aluminum prices during the quarter, alongside the expected headwinds this year related to negative PPI and higher aluminum conversion costs. This was partly offset by volume growth and lower operational and overhead costs. Beverage cans continue to take share in our customers' European packaging mix, and our expectation for shipments growth is around 3% for full year 2025. Capacity remains tight in the season in certain geographies and can sizes, and we expect that the continued ramp-up of our more recently installed capacity and flexibility investments will support near-term growth. In the Americas, revenue in the second quarter increased by 21% to $840 million, which reflected higher volumes and the pass-through of higher input costs to customers, including the impact of the higher Midwest premium in the U.S. Americas adjusted EBITDA for the quarter increased by 34% to $133 million due to favorable volume growth, category mix and lower operating costs. In North America, shipments increased by 8% for the quarter, a continuation of strong growth from the first quarter and reflecting our portfolio's mix of attractive and growing customers and product categories. Market demand for nonalcoholic beverages in cans was strong in the quarter with growth in carbonated soft drinks and strong growth in both sparkling waters and in the energy drinks category, which continued its strong quarter 1 growth and grew by a double-digit percentage. We maintain our guidance for full year North America shipments of mid-single-digit growth. In Brazil, second quarter beverage can shipments increased by 12%, reflecting favorable customer mix as we outperformed the industry, which grew only modestly post Carnival. We retain our guidance for full year shipment growth for Brazil of at least low single-digit percentage. This reflects the overall softer expected industry backdrop for the second half of the year. In summary, for the Americas, we expect shipments growth of mid-single-digit percentage for 2025. I'll hand over now to Stefan to talk you through our financial position before finishing with some concluding remarks.

Thank you, Ollie, and good morning, good afternoon, everyone. We ended the quarter with a robust liquidity position of $680 million. We note that, in addition to our strong liquidity position, we have no near-term bond maturities. Net leverage of 5.3x net debt over last 12 months adjusted EBITDA represents a decline of 0.5 turn of leverage versus Q2 2024, reflecting adjusted EBITDA growth. It remains our expectation that leverage ratio at year-end will be around 5x. We reiterate our expectation for adjusted free cash flow for 2025 of at least $150 million. In terms of the various components of free cash flow, our expectations are mostly in line with what we said in April. So we still expect maintenance CapEx of around $135 million, gross CapEx of around $70 million, lease principal repayments of just over $100 million, cash interest of just over $200 million, as well as a small outflow in working capital. We now expect cash tax closer to approximately $40 million and as well as small exceptional cash outflows of approximately low teens millions. We have today announced our quarterly ordinary dividend of $0.10 per share. And with that, I'll hand it back to Ollie.

Thanks, Stefan. So just before moving to take your questions, just to recap on our performance and key messages. So firstly, adjusted EBITDA growth in the second quarter of 18% was ahead of guidance, underpinned by global shipments growth of 5% and in particular, a strong performance in the Americas. And across our markets, the beverage can continues to outperform other substrates in the customers' packaging mix, supporting our growth. So reflecting our quarter 2 outperformance and favorable currency movements and assuming no further adverse change to the current macro environment, we are upgrading our full year adjusted EBITDA guidance. Full year adjusted EBITDA is now expected to be in the range of $705 million to $725 million based on current FX rates. We continue to expect full year shipments growth for AMP to be between 3% and 4%. In terms of guidance for the third quarter, adjusted EBITDA is expected to be in the range of between $200 million and $210 million, ahead of the prior year of $196 million. So having made these opening remarks, we'll now proceed to take any questions that you may have.

Our first question comes from Stefan Diaz with Morgan Stanley.

Maybe just to begin, another very strong quarter as far as North American volumes. I know you called out some category mix, but maybe if you could just dig into what you're seeing so far in North America and what your expectations are for the region into the back half?

Sure. So look, as you say, we called out, I think, the main categories that are performing well, which you can see in the public data. So soft drinks generally in cans has had a strong 4 weeks, 12 weeks, 52 weeks. I mean the market as a whole is probably at a 2% to 3% level, which is very healthy given the size of the market. And then within that, CSD is strong, energy drinks, particularly strong. So I think last year, we were all debating when the energy category would come back. And I think we had strong hopes for 2025, and those have certainly played through with double-digit growth in cans. And then the other one we picked out was sparkling waters. We also have strength in our portfolio on the cocktail side, which is doing very well with certain innovative new players. And again, I think we're on the right side of the market, beer and cans, obviously under pressure, with the beer market under pressure. So being in soft drinks, I think, has been good for us. And then we also, I think, are with some strongly growing innovative new customers as well as some well-established customers in those categories. So if we look to the second half, we're not predicting it to be quite that strong. It was particularly good in the first half, somewhat ahead of our expectations. So we expect some reduction in that still looks pretty healthy, which is why we're still with our guidance, but just not quite as strong as we had it in the first half. And we think that the category trends broadly stay similar. So strength in those soft drinks categories. And overall, I've been saying it for a couple of years now. I think it reinforces that the growth we've had since 2018, 2019 in North America. We kept everything that we gained through the COVID period, and now we see growth again, thanks to the innovation that's going into the can, thanks to the sustainability credentials of the can. So very hopeful that we can sustain this overall level of performance for the market in North America.

That's very helpful. And then I think you mentioned some capacity constraints in Europe, particularly with CSD. I guess could you just give a little more details around that? Maybe if you could size how much of the volume impact that had in the quarter? And if you expect these headwinds to continue into the second half?

Sure. Yes. So look, I think the story of Europe was definitely that beer was a bit weaker in general. Volumes weren't great in our markets and can sales similarly suffered a bit for that. The can sales were ahead of other substrates. So the strength was in soft drinks, and there was a lot of strength in soft drinks, but that was also particularly in the energy category as well as CSD and in slim and sleek sizes that we were a little bit short in the season because we have a strong beer position. So in the bigger can formats that we can't just immediately pivot into smaller formats for soft drinks. So although we've got a good network, lots of options across the market, we couldn't follow all the growth in the season. And that's probably 1 to 2 points of growth that we couldn't follow on the soft drinks side. I think looking into the second half, I think that in Q1, customers clearly built some good amount of inventory. We had 5% growth in Q1. So we're sort of around the 3% year-to-date, and that's roughly our prediction for the full year. I think the market for cans remains very healthy in Europe. It's on a long-term trend of this sort of number. We've seen other reporting a little bit higher, but with a different geographic mix. So it feels like the 3% to 4% market growth, we're around 3%, our prediction for the year. That feels the right sort of place. I'm very encouraged by just the ongoing growth for the European market overall.

And we'll take our next question from Arun Viswanathan at RBC Capital Markets.

Congrats on the strong results. Just wanted to get some more color across maybe the Americas. It sounds like there was better-than-expected performance. What do you think that was driven by? Was it strong promotional activity in the quarter? And then I guess, when you think about that looking ahead, do you expect any drop-off in that sell-through? Do you think customers potentially or consumers potentially hoarded product on those promotions? Or do you expect sell-through to continue over the summer and into the fall?

Yes. No, look, good question. I think it's obviously hard to look into the crystal ball. Clearly, soft drinks promotions were strong in the first half, among the strongest we've seen. And therefore, you can expect that customers were buying up what they could see. But again, it's a pretty fast-moving product. So I wouldn't expect to see a huge amount of stockpiling. So I think it will depend what customers do in the second half on the promotional front, whether we see exactly the same momentum. But it's clear in our portfolio that not all of this is promotional. Clearly, we've got innovative drinks, new drinks coming to market in the gut health area, in the cocktails area, sparkling water continues to be very strong. So we don't see that as particularly promotional. And again, this is more about, I think, innovation going into the can, which is a more sustainable way forward. So we are predicting that the second half isn't quite as strong as the first half because the first half was really strong, but we're not predicting that it's terrible. We're still seeing good growth in the second half in North America.

And then similarly, on Europe, I guess, a little bit weaker than we expected, which is kind of surprising just given continued growth there, but maybe there are some specific factors going on. So maybe you can just elaborate on your outlook there as you look into the second half of the year and '26.

Sure. No, no. As I said, I think we've got some specific category geographic issues in the quarter. So had a couple of markets that were particularly weak on beer. We had poor weather, particularly in the South. So for whatever reason, the beer market wasn't as strong as we anticipated and probably everyone anticipated in our geographies. And although, as I say, the can was outperforming the other substrates, the can was also under some pressure as a result of that. And again, I wouldn't underestimate, I think customers did build inventory much more effectively this year than last year. I think they learned a lesson last year when they were short inventory going into the season, and so probably the average of our 5% Q1 and our 1% Q2 is the right number to think about for the market, which is pretty much where we pick the market for the year and where we see our second half. And again, if I look into 2026, all the good trends are still there for Europe. So we've still got cans gaining share in the mix. We've got Germany still with very low can penetration relative to other developed markets for all the reasons we've talked about. We've got gains in soft drinks that are pretty strong. I think the can sustainability credentials are only improving in Europe with higher recycled content rates and lower carbon footprint. So we see a lot of good trends, I think, for Europe going forward and would anticipate these sorts of growth rates on average and maybe you get some quarter-to-quarter volatility like this. But overall, the 3% to 4% feels like a good place to pick the market.

Great. If I could just ask one more. Just overall on your footprint, any regions where you feel you would need to take action, whether to increase or decrease capacity?

Yes, certainly no decrease at this point. If we're talking about Europe, I think we're very tight. The market is clearly very tight in certain can sizes, particularly in the season. Our peers have announced some capacity growth. I think the market needs that. We think this is a $90-plus billion market now, growing at 3%, 4%, then you need some capacity added every year, clearly. We're getting to the point where we'll have to think about capacity additions. We've got good growth this year in capacity as we ramp up existing investments. We'll put some more flexibility into the network. But that will take us through '26, but then we'll have to look at the situation and probably we'll need to look at the south before the north, but we're evaluating that situation as we see our customer mix develop. And then if we're talking about the other regions, there's still capacity to grow into. In North America, they're less than we would have thought at the beginning of the year, given the strength of the growth. And in Brazil, I think we've signaled there is a decent amount of capacity for us to grow into, which has been hard curtailed, but mainly in the Northeast where growth is a bit less in the market. But overall, I think we feel pretty comfortable with our position at the moment for the next 12, 18 months of growth.

We'll take our next question from Josh Spector with UBS.

First, I just wanted to ask on the European cost side. When you talked about some of the timing in aluminum, how much of an impact was that in the second quarter? And do you make that back up in 3Q and that there's maybe some outperformance on margins? Or is that something that would take longer than that?

Yes. Look, I mean, these timing effects, they come and go. Sometimes they happen in the quarter, sometimes they cross quarters. I don't think we see it particularly being made up in 3Q, but I'll let Stefan comment. But I'd say more just that, yes, they happen. They go up and down. It just happens that it was particularly concentrated in this quarter because of the tariff announcements and then the weakening of the dollar, which particularly impacted the euro aluminum pricing and therefore, the gap between when we buy it and when we sell it on to customers. But Stefan, maybe you want to add something?

Yes. Look, that's obviously right. It's sort of a timing between sort of the price we invoice the customer and the price of what we procure. I wouldn't expect it to come back unless sort of the price moves again fundamentally and depending on which direction. So I think probably we are through most of the effect in Q2, but I wouldn't disclaim sort of to be reversed sort of in the near term.

And then if I could ask about kind of your implied Q4 guidance. I don't think anybody is going to blame anybody for being conservative at this point. But I guess if we look at the implied EBITDA, it's potentially down significantly year-on-year in Q4 and is actually even below 2023 EBITDA. Is there anything specific that you're seeing that would drive your assumptions there, either pull into 3Q or something else that you call out?

No, I think you mentioned that it's an uncertain environment from a macro perspective. The European side of the business is facing some cost challenges that we've discussed, which will impact the fourth quarter. Last year in Europe, the fourth quarter was relatively strong in terms of growth. In South America, as we noted, we expect a slowdown in our own volume growth compared to the first half of the year. We have significantly outperformed the market, but overall market growth is quite slow, at very low single digits. These are a few things to highlight.

And our next question comes from Richard Carlson with Wells Fargo.

I'm standing in for Gabe Hajde today. So just a follow up on the last question about the back half guide because I think that is something that's catching a lot of people's eyes today. Other than the slowdown in the growth that you guys have referenced, are there any other major cost pieces that are in there that we need to keep in mind when we're modeling this out? And then also just from that growth perspective, you've definitely had a lot of outperformance in North America so far year-to-date. Brazil looks quite good. I guess Europe maybe is a little bit disappointing, but what are really the biggest moving pieces between the first half growth rates and the second half growth rates?

I mentioned the various markets earlier, and regarding Europe, we expect a similar growth rate in the second half. However, we're approaching this with some caution due to a challenging second quarter that fell short of expectations. For Brazil and North America, we anticipate a slow down in growth rates. As Stefan pointed out, the Brazilian market has grown 1% year-to-date, while we've surpassed that with significant growth—12% in Q2 and nearly 8% year-to-date. This has been a discussed outcome in our calls and those of our competitors, as we all cater to the major brewers who tend to promote in different quarters. This means that while certain factors may favor us at times, they don’t always do so consistently throughout the year. Therefore, we expect some regression to the mean in Brazil. Regarding North America, given our strong performance in the first half, we don’t expect that level of growth to continue into the second half. We're certainly exercising caution here. Lastly, as Stefan mentioned, Q4 remains distant, and the overall macroeconomic landscape is uncertain. This is reflected in our cautious outlook for our Q3 guidance, which still anticipates growth. We don't foresee any additional costs impacting Europe as we move into the latter half of the year. Is that accurate, Stefan?

Yes, that's correct.

Got it. And then I guess specific to the energy market, that's been, of course, a really hot market here in North America, probably going to see some tougher comps coming up soon. But what are you guys seeing there? And do you have a view on whether or not the incremental buyer of an energy beverage is leaving sodas? Are they getting away from CSDs and maybe cannibalize CSDs? And if that is happening, how does that impact you guys? It seems like maybe your exposure or your market share within energy is quite a bit higher than CSD. So just wondering if you guys have thought about how some of the dynamics in the buying between CSDs and energy is impacting you?

Yes, we're not observing that. I don’t have detailed data on the exact switching patterns, but we are definitely seeing growth in carbonated soft drinks in cans, which is very positive. We’re continuing to gain market share, and I believe the data indicates we’re up to 56%, while plastic is down to the 40s. So that transition is happening. From our perspective, both energy drinks and carbonated soft drinks are showing good growth, and we’re not seeing any significant trade-off between the two. Therefore, I’m not concerned about that at this juncture. Additionally, within the energy sector, new players are performing exceptionally well, and existing players are also thriving. As we mentioned last year, this is a strong category filled with successful brands that understand innovation. They may have taken a step back last year, but they've re-entered the market strongly this year, which is very encouraging.

Got it. And then just one last question from me. The same question you've been asked in the last few quarters is regarding the MAHA movement, particularly in North America, with the shift towards fewer artificial sweeteners and dyes. Are you noticing any increased discussions from your customers about the potential challenges this might pose to their business?

No, really nothing specific, to be honest. And again, if I look at our position in those categories, it still seems to be growing at the expense of other substrates. And when I think about the impact of that, it could also fall more on other substrates. So yes, nothing very specific on that to comment on.

Our next question comes from Michael Roxland with Truist Securities. Are you hearing any increased conversation from your customers about the potential headwind that could be to their business? Oliver Graham, CEO, responded that there is really nothing specific to comment on. Looking at their position in those categories, it still seems to be growing at the expense of other substrates. The impact could also fall more on other substrates. So, there’s nothing very specific on that topic to discuss.

This is Nico Piccini on for Mike. I guess, first off, can you speak to any manufacturing efficiency that could have contributed to the performance this year so far? And how should we think about what you target there going forward?

Yes. Look, I think we referenced in the remarks that there have been improved operational costs on both sides of the Atlantic. Obviously, North America helped by the fact that we're running so full. We're very low inventory levels in North America for another year. And obviously, when you run the plants fuller, unit costs drop and efficiencies grow. So that's definitely helped. But then I think our Europe performance has been very pleasing on the manufacturing side. So good production levels, good cost performance. So overall, yes, we're happy with the network. We have manufacturing efficiency targets built in every year. It's the nature of can making. So yes, we're not going to talk about them specifically. They're part of our guidance. And we're looking obviously very ambitiously at cost savings and increased efficiency in our manufacturing network, and that's supported by a number of big programs within the business.

Got it. And then just secondly, if you could speak to maybe contract negotiations. I imagine at this point in the year, your 2026 volumes are maybe largely contracted. But could you speak to how much it is for '26 and how much you have under contract for 2027?

Yes, as you mentioned, we are mostly contracted or well advanced in negotiations for 2026, giving us strong visibility. For 2027, I don't have the exact percentage available, but we are also largely contracted. We are currently navigating through the wave of CSD tenders in North America, and Europe has seen a significant amount of activity this year that should carry us through 2027. Therefore, the business is progressing through the post-COVID contract renewals, and we are starting to gain good visibility on volumes for 2026 and beyond.

And it appears there are no further questions. One moment, we do have Mr. Stefan Diaz who has signaled.

The European market is quite competitive, and considering your cash flow and dividend commitments, do you believe you are in a strong position to take advantage of potential growth in the next 12 to 18 months if you decide to increase capacity in that region?

Yes, I'll start, and then I'll let Stefan pick it up as well. But look, as I mentioned, we're ramping up probably in the order of $1 billion of capacity this year with the projects that we completed in '23 and '24 and with some improvements to those projects and some speed ups. So that's already taking us healthily through this year and into next year. And then we have another some other areas where we can still see capacity growth in the existing footprint next year. And then I think we signaled we might have to add something under the existing footprint going into '27. And we've talked about CapEx levels for this year being broadly similar probably next year. So I think that when I look at our growth profile for Europe, I'm not concerned. I think we can manage that within our existing forecast and stay relevant and competitive in the market. But I'll also pass that one to Stefan.

Yes. Look, I fully agree. I mean, obviously, we gave indications for this year in terms of growth CapEx. I think all projects, I think we have line of sight of, and we feel are good return opportunities in terms of extensions, speed ups, I think we are going ahead with. And I think for the foreseeable future, I think we have, I think, good visibility sort of in our pipeline of projects, and I think we can address those within the existing sort of cash flow profile.

That's really helpful. I guess digging a bit deeper, any capacity that needs to be added beyond the $1 billion you mentioned for this year would likely be more focused on brownfield projects, assuming demand continues on the same trajectory rather than requiring greenfield projects. Is that a correct assumption?

Yes, I think that's definitely a good assumption. Brownfield might suggest to some that a major new plant is required, but we are actually referring to existing buildings. We are talking about utilizing current facilities, which are undoubtedly the most efficient and lowest cost for capital investment. Therefore, for the next two to three years in Europe, we don't see the need to construct large new facilities at this time.

It appears there are no further questions at this time. I'll turn the conference back to Oliver Graham for any additional or closing remarks.

Thanks, Lisa. So thank you for joining our call. So just to summarize, another very strong quarter for AMP. Global shipments grew by 5% in the quarter, adjusted EBITDA by 18% ahead of guidance, particularly driven by the Americas. And reflecting that quarter 2 outperformance and favorable currency movements, we're again raising our expectations for full year adjusted EBITDA. So with that, thanks for joining, and we look forward to talking to you again at the Q3 results.

Thank you, ladies and gentlemen. This concludes our call today. You may now disconnect from the call, and thank you for participating.