Earnings Call Transcript - AMBP Q1 2026

Operator, Operator

Welcome to the Ardagh Metal Packaging First Quarter 2026 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.

Stephen Lyons, Investor Relations

Thank you, operator, and welcome, everybody. Thank you for joining today for Ardagh Metal Packaging's First Quarter 2026 Earnings Call, which follows the earlier publication of AMP's earnings release for the first 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 first quarter can be found on AMP's website at ardaghmetalpackaging.com/investors. 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.

Oliver Graham, Chief Executive Officer

Thanks, Stephen. We're pleased to report strong first quarter results for AMP with adjusted EBITDA growth of 15% versus the prior year, significantly ahead of our guidance and demonstrating the resilience of our business. Beverage can sales declined by 1% versus the prior-year quarter, in line with our expectations as we cycled strong prior year growth of 6% and due to the impact of contract resets in North America. Our adjusted EBITDA outperformance in the quarter was driven by Europe, which benefited from strong input cost recovery, including a favorable timing impact from the revaluation of freight cost-related hedging as well as favorable volume mix effects. Performance in the Americas was broadly in line with expectations. Brazil delivered strong results driven by above-market volume growth, which was offset by the impact of a more challenging operating environment in North America where adverse weather conditions and aluminum supply chain disruptions drove higher operational costs. While the supply chain situation is improving, we do expect to see further impact into Q2. The conflict in the Middle East did not have any material impact on our Q1 performance. AMP has no manufacturing operations in the Middle East and no significant direct supply chain exposure. We continue to monitor the geopolitical environment and the associated volatility in input costs, in particular, energy, freight and certain direct materials. AMP's exposure to the recent increase in energy prices is small given our hedge positions for 2026 and beyond. However, we do anticipate some moderate input cost increases in the second half as a result of the impact of the Middle East conflict on certain direct materials. Now looking at AMP's quarter 1 results by segment. In Europe, first quarter revenue increased by 18% to $625 million or by 6% on a constant currency basis compared with the same period in 2025. This was due to favorable volume mix effects, including the impact of the IFRS 15 contract asset and the pass-through of higher input costs, including higher aluminum prices. Shipments declined by 1% for the quarter, which reflected the ramp-up of new contracts and the cycling of a strong prior year comparable of 5%. We experienced good growth in carbonated soft drinks and the energy category and across our diverse range of smaller growing categories. Through this strong underlying growth in nonalcoholic categories as well as our commercial actions and network enhancements, our portfolio saw a favorable mix shift in the period and good growth in specialty can volumes. First quarter adjusted EBITDA in Europe increased by 53% versus the prior year to $75 million, strongly ahead of expectations. On a constant currency basis, adjusted EBITDA increased by 36%, principally due to higher input cost recovery and favorable volume mix, including the impact of the IFRS 15 contract asset, partly offset by higher operational and overhead costs. Our input cost recovery in the quarter benefited from a favorable timing impact from the revaluation of freight cost-related hedging. Regarding our direct energy exposure, AMP is well covered for its energy needs in 2026 and beyond. For 2026, we're over 85% covered for our energy requirements; for 2027, over 75%, and we're more than 60% covered for 2028. In 2026, in terms of volume growth, we reaffirm our expectation of around 3% in Europe. Capacity remains tight in the region, and we are therefore optimizing our network to better serve higher-demand can sizes in faster-growing categories. In our last update, we highlighted our intention to add additional capacity within existing facilities in the attractive markets of Spain and the U.K. on a measured basis over the coming years. We continue to progress these plans, which are underpinned by our favorable market positions and our confidence in Europe's growth outlook. In the first two months of the year, beverage packaging scanner data across our markets continue to show share gains for the beverage can versus other packaging substrates. In the Americas, revenue in the first quarter increased by 19% to $879 million, principally reflecting the pass-through of higher input costs to customers, including the impact of the higher Midwest Premium and favorable volume mix effects. Americas adjusted EBITDA for the quarter was broadly in line with expectations with a 2% decrease versus the prior year to $104 million, primarily driven by higher operations and overhead costs and lower input cost recovery, partly offset by favorable volume mix effects. The strong performance in Brazil, driven by 14% shipments growth and increased fixed cost absorption was offset by a more challenging operating environment in North America. In North America, shipments decreased by 5% for the quarter. This reflected lower volumes after expected contract resets, the impact on operations from supply chain challenges and the cycling of a strong prior-year comparable of 8%. Supply chain challenges in the period included the impact of disruptions to metal supply and adverse weather at the beginning of the year. Underlying demand dynamics in the industry remain robust with strong industry scanner data year-to-date with the exception of the beer category to which AMP has only a low single-digit exposure. In particular, the energy category continues to record strong growth supported by broader distribution and further innovation. AMP continued to enjoy good growth in the energy category in the quarter, reflecting our broad positioning across the category. Looking into 2026, we continue to expect industry growth of a low single-digit percent. As previously indicated, we expect some softness for AMP following contract resets. We anticipate 2026 being a transition year with a small volume decline and with a more favorable second half volume versus the first half. We expect to return to growth in 2027, at least in line with the industry on the back of additional contracted filling locations and our attractive portfolio. Of note in North America was that on April 6, 2026, the court entered a jury verdict pending any post-trial motions in connection with the lawsuit filed against Boston Beer in 2022 for breach of contract in respect of minimum volume purchase requirements. And the jury awarded damages of approximately $175 million to AMP, plus pre-judgment interest if assessed. In Brazil, first quarter beverage shipments increased by 14%, which represented a strong improvement versus the fourth quarter and was also ahead of the industry due to our customer mix. Industry data indicates that following a strong start to the year in January and February, March activity was softer and resulted in an overall modest decline in volumes in the first quarter. Looking into the remainder of 2026, we continue to expect industry growth of a low to mid-single-digit percentage and for AMP's volumes to broadly track the market. I'll hand over now to Stefan to talk you through our financial position for the quarter before finishing with some concluding remarks.

Stefan Schellinger, Chief Financial Officer

Thank you, Ollie, and good morning, good afternoon, everyone. We ended the quarter with a robust liquidity position of $488 million, in line with expectations. We note that in addition to our strong liquidity position, we have no near-term bond maturities and the currency mix of our debt broadly matches the currency mix of our earnings. During the quarter, AMP completed the refinancing of the asset-based lending facility, which was upsized to $450 million and with its maturity date extended to January 2031. Net leverage of 5.7x net debt over the last 12 months adjusted EBITDA compares with 5.5x in the prior year quarter, with the increase reflecting the impact of the refinancing of the preferred shares in December. Excluding this impact, the underlying net leverage metrics slightly declined year-over-year. In terms of 2026, we approximately expect the following for the various components of free cash flow, total CapEx of $200 million, including growth investments, cash interest of $220 million, lease principal repayments of approximately $115 million. Lease principal repayments were higher in the first quarter versus the prior year, which reflected the buyout of an existing lease in North America. Cash tax of approximately $30 million and a small outflow in working capital. Finally, today, we have announced our unchanged quarterly ordinary dividend of $0.10 per share. And with that, I'll hand it back to Ollie.

Oliver Graham, Chief Executive Officer

Thanks, Stefan. Before questions, I'll recap AMP's performance and key messages. First, adjusted EBITDA was $179 million in the first quarter, above our guidance of $160 million to $170 million, driven by strong performance in Europe. Global volumes declined 1%, in line with expectations, reflecting a strong prior-year comparable of 6% and the effect of contract resets in North America. Third, AMP has no manufacturing operations in the Middle East and no significant direct supply exposure. Our energy-cost position is protected through a strongly hedged position in 2026 and beyond. For 2026, we reaffirm adjusted EBITDA guidance of $750 million to $775 million. Adjusted EBITDA growth is expected to be driven by operational efficiencies and cost savings, volume growth, and an improved category mix. We view 2026 as a transition year in North America, with volumes expected to pave the way for a return to growth and to be at least in line with the industry in 2027. For the second quarter, adjusted EBITDA is expected to be between $210 million and $220 million versus $212 million in the prior-year quarter on a constant-currency basis.

Operator, Operator

Please stand by.

Oliver Graham, Chief Executive Officer

We think we lost connection, so we're just opening the call up to questions now.

Operator, Operator

And our first question comes from Matt Roberts from Raymond James.

Matthew Roberts, Analyst - Raymond James

In the prepared remarks, you noted modest cost increases in the second half. Can you give any additional color on what specific categories those are in? Is it more pronounced in a certain region? Or what is not covered in pass-through or has a lag in recovery, whether that's freight, energy, coatings? Any additional detail there?

Oliver Graham, Chief Executive Officer

Sure. Yes. That's mostly in our coatings area. As I said in the remarks, we're very well covered on the energy side. There are some pass-through provisions in coating contracts in the year that will potentially come through in the second half if oil prices stay very elevated. But they obviously haven't changed our guidance range. So that gives you a sense of the scale.

Matthew Roberts, Analyst - Raymond James

Right. I appreciate that. And you did note that you did reaffirm the guide. Q1 came in a little bit better than you were expecting. Sounds like volumes broadly are similar as well. Has anything changed on the volume outlook by region? Or based on the Q1 beat, would that imply the cost headwinds are around roughly $15 million. Could you ballpark that, if possible?

Oliver Graham, Chief Executive Officer

No, sure, Matt. We're just at Q1, there's plenty of the year to go. So I think that's one reason just to remain a little bit cautious given the state of the world. There's a little bit of input cost inflation we expect in the second half. I think we have to accept that the consumer is facing into a lot of inflation at the minute. So we can't be absolutely sure though. We didn't see a reason to change our volume guides because when we looked at the Q1 market data that we could see in our numbers, we saw a lot of strength in that data. In Europe, I think particularly, we've got data in January and February in our key markets. There's some real double-digit growth rates in some of those markets in particularly soft drinks categories. Brazil obviously had a very strong January and February coming off a very strong November, December. So in other words, a very strong summer. We're going into the winter season. We do have the World Cup in the winter season, which should be favorable. And North America, again, the volume number is still extremely strong across soft drinks categories, particularly energy, especially going into the Easter period, strong promotional activity. So although I think it's appropriate to be cautious at this stage of the year, we definitely saw no reason to really change the volume numbers on a concrete basis. So I think, yes, we're just being cautious around possible input cost inflation in H2 and recognizing that the consumer may be under some pressure during the year.

Operator, Operator

We'll take our next question from George Staphos with Bank of America. Again, the volume number is still extremely strong across soft drinks categories, particularly energy, especially going into the Easter period, with strong promotional activity. So although I think it's appropriate to be cautious at this stage of the year, we definitely saw no reason to change the volume numbers on a concrete basis. I think we're just being cautious around possible input cost inflation in the second half and recognizing that the consumer may be under some pressure during the year.

George Staphos, Analyst - Bank of America

Congratulations on the progress so far this year. I'll ask three questions in sequence and return to queue just for time. First of all, can you talk about what the impact was on the timing effect on the hedge revaluation in Europe? How large of a factor was that? Is there any residual into the rest of the year? Secondly, Ollie, you touched on it a little bit. Can you talk about what World Cup and to some degree, America's 250 is meaning for volume relative to what a normal summer might look like? And then third point, Brazil, can you talk a little bit about how things softened there in the market? What's causing that? And any outlook that you can take into, obviously, now the weaker winter months and the implications for the rest of the year?

Oliver Graham, Chief Executive Officer

Sure, George. On the first one, I think sort of mid-single-digit millions of benefit in the quarter from the European freight hedging position coming from, obviously, we're careful around hedging some of the positions that are on us. There is some possibility of some of that reversing depending on what happens to commodity costs in the year. So some of that is potentially a timing impact, which is why we're not overrating it in our forward guidance. So that's the sort of order of magnitude for that. Regarding the World Cup and Brazil, those questions get a bit intertwined because I think where it has the potential to be probably most impactful is in Brazil, given that it's falling in the winter period, given the sponsorship of the Brazilian national team and the focus on the World Cup and assuming they go deep into the tournament. So that's why we would be hopeful that this slightly negative start to the year on the full quarter after a very good January and February would be moderated into Q2 and Q3. And we'd also be hopeful after the summer we had, that we've just come through that next winter would also be a good period. We think some of the macro elements are stabilizing. We've also got some elections. We do see in the data that we continue to have the can take share from returnable, and we know that's a long-term trend that will continue. Obviously, the major brewer down there controls some of that dynamic and they have their own pressures that drive it sometimes quarter-to-quarter. But I think if you look at the long-term trend, certainly still well in place. So yes, I wouldn't overread too much probably in the Q1 numbers in Brazil. I think we're still hopeful as we said, sort of low to mid number for the year and for us to be in line with that. Then World Cup outside of Brazil, we saw a tick up towards the end of the quarter in terms of label activity and graphics activity. We're definitely seeing a lot of promotional-type cans or individual-type cans coming into the mix into the inventory build, and that would suggest World Cup-related demand. I think we're seeing elsewhere in the market some signs that there could be some positive effects. I'm always cautious to call it too early. We need to see it sell-through. It's often very weather-related as well in terms of how exactly it plays through. But yes, all positive signs at the moment, I think, in both Europe and Brazil.

George Staphos, Analyst - Bank of America

Just one quick one, just a yes or no, and I'll turn it over. On aluminum, you mentioned you are seeing supply constraints in North America, at least that's what I took away. Despite the constraints, do you feel like you're positioned well enough to be able to meet your commitments over the rest of the year?

Oliver Graham, Chief Executive Officer

Yes. I think it does seem like the situation is moderating quite quickly now. As we've gone into April, a lot of metal is coming into the market from overseas that obviously was on long supply chains. We do see that landing now and helping to improve the situation. We also have the first new mill ramping up now. We have the second new mill coming at the end of the year. So I think we're hopeful now that we're through the worst. The Middle East conflict didn't help; some supply out of the Middle East was restricted in March. But as we see the trends now sitting towards the end of April and going into May, yes, we're hopeful that that's all moderating. We certainly don't see any need to change our guidance or change our forecast off the back of it.

Operator, Operator

And we'll take our next question from Anthony Pettinari with Citi.

Anthony Pettinari, Analyst - Citi

Just following up on volumes and the Middle East conflict. It sounds like you haven't seen any impact and obviously don't have any assets in the region. But I'm just wondering, you talked about strong scanner data in January, February. I think the conflict started at the very end of February. As you look at March, April, have you seen any change in order patterns in terms of people prebuying or maybe easing off? Or as you talk to customers or channel partners, is there a sense that there could be an impact if this continues to go on or maybe it's better or worse in North America versus Europe? Any color you could give would be helpful.

Oliver Graham, Chief Executive Officer

I don't want to mislead in the January, February comments—it's just where we actually have data because we're still just in April. So not all the March data and the full quarter data has come through. Our impression is that Europe strengthened in March after very encouraging scanner data for January and February, particularly Germany on the soft drinks side. My prediction would be that March scanner data for Europe will be good. Everything we're seeing in our numbers was good in March and continues into April in a positive way. In North America, we saw going into Easter really good volumes in our business, particularly in certain categories. So nothing to suggest any change at this point. In Brazil, January and February were stronger than March. As we go into the winter season, it can be a little volatile depending on how people build inventory into the summer and what they were left with. One of the reasons we've held guidance and held our volume forecast despite the global situation is that it demonstrates the resilience of the beverage can sector, the way our customers are using beverage cans in their mix and particularly prioritizing the beverage can, and the resilience of our own business. So it's a very positive outlook from our point of view to hold guidance in this geopolitical environment.

Anthony Pettinari, Analyst - Citi

Great. That's very helpful. And maybe just one follow-up on Europe. It seems like results really exceeded your expectations. Is the biggest surprise there from your perspective on the volume side in CSD or energy drinks? Or is it the cost recovery? Just if you think about sort of the bridge versus your initial expectations, what was the biggest driver from your perspective of the outperformance?

Oliver Graham, Chief Executive Officer

The biggest driver was clearly the input cost recovery. We mentioned the timing effect and the one-offs potentially around the freight. We also saw a strong mix benefit in the quarter. We had specialty can growth because of the categories we're in, which played into the IFRS 15 contract asset because we had very strong production and good specialty volumes. So both of those played into the contract asset and volume mix. It was a really good performance by the region, delivered against our expectations, and ramped up our new specialty volumes. We did a change to one of our plants to improve our specialty footprint, and that ramped up extremely well. Production was a bit ahead, and very good delivery on all elements of cost.

Operator, Operator

And our next question comes from Josh Spector with UBS.

Anojja Shah, Analyst - UBS (Sitting in for Josh Spector)

This is Anojja Shah sitting in for Josh. I just had a question on the Boston Beer verdict. What steps are left in order for you to get that $175 million? Is it definite and just a matter of time, or what legal steps are left? When might you actually receive this? And will it have any impact on your capital allocation priorities?

Oliver Graham, Chief Executive Officer

We're not going to talk in much detail about it because it's still legal proceedings. There is the option for the defendant to appeal. That could delay realization. We don't see that changing our capital allocation priorities at this point. We've laid out the next investments that make sense for the business, and we're conscious of staying within our leverage position. At the minute, we don't see it changing any capital allocation policies.

Anojja Shah, Analyst - UBS (Sitting in for Josh Spector)

On the aluminum availability issue, can you quantify what the drag was in Q1 and maybe what's in your guidance for Q2? And then do you expect it to fall away after that?

Oliver Graham, Chief Executive Officer

Across the weather and supply issues in January and February, there was very cold weather in the southern United States that led to disruption. We had people struggling to get to facilities and freight issues on the roads. Between that and the metal disruptions, we think we lost 1 to 2 points of growth in the quarter across cans. That's the order of magnitude we saw in the quarter. At the minute, we're not predicting anything particular in the guidance for Q2. We held roughly to where we had planned because in the last couple of weeks things have improved quite significantly. At the moment, we're hopeful we can come through Q2 without any significant drag.

Stefan Schellinger, Chief Financial Officer

Maybe just regarding the cost side of the impact: we had adverse impact on freight costs as well as on manufacturing costs. We had to move product around our manufacturing network and had some unfavorable freight lanes as a result. In operations, it was more hand-to-mouth, shorter runs, maybe not running the right spec all the time in terms of metal. If you add that all up, it was probably a mid- to high single-digit impact in the quarter.

Anojja Shah, Analyst - UBS (Sitting in for Josh Spector)

Mid- to high single-digit millions on EBITDA, you mean?

Stefan Schellinger, Chief Financial Officer

Yes, correct.

Operator, Operator

And we'll go next to Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan, Analyst - RBC Capital Markets

Maybe I'll just get your thoughts on inflation and what you're seeing on the tariff side as well. In North America, how has the Midwest Premium affected demand and can pricing, if at all? And do you see that changing with Section 232 considerations?

Oliver Graham, Chief Executive Officer

We keep looking for it because between the LME and the Midwest Premium it's pretty significant. People's hedge positions may be rolling off a little bit, but we're not seeing it in the data. We're not seeing it in our customers' mix and their plans, and not seeing it on the shelf. The can has a lot of resilience at the moment: it's an efficient package, consumers are favoring it, and sustainability credentials play strongly in certain parts of the world. The tariff situation hasn't got better; the last piece made it marginally worse, but not significantly. Right now, the data is a testament to the resilience of the industry and the substrate. We are also seeing inflationary impact into petrochemical and energy, which are negative for competing substrates. Net-net, although we should be cautious with broader consumer inflation, the can seems to be continuing to win in the mix.

Arun Viswanathan, Analyst - RBC Capital Markets

To clarify, are beverage companies absorbing some of that extra cost and not necessarily passing it on in higher beverage prices? Or are customers paying higher prices but willing to do that?

Oliver Graham, Chief Executive Officer

There was a significant increase in pricing over the last few years post-COVID and through the inflationary period. I think there's room for some absorption. We don't know all the ins and outs of our customers' P&L or the nature of their hedge positions. We aren't seeing a huge amount of price increase at retail. Promos are still strong, and there isn't a lot of room to increase price much further given the price increases over the last few years. Our sense is our customers are managing it.

Arun Viswanathan, Analyst - RBC Capital Markets

On the supply-demand side, given the strong growth in Europe, would you potentially need to add capacity there? Similarly in North America with strong energy growth, could growth continue? What are your plans on capacity additions in Europe, North America and Brazil, if any?

Oliver Graham, Chief Executive Officer

We plan to add capacity in Europe where we are the most tight in terms of network utilization, with Spain and the U.K. being the two markets we'll invest in. Those projects will come in over the next couple of years to support growth. We see peers investing in that environment and customers putting growth plans behind the can. In North America, with the contract resets that took place last year, we've got space in the network. We've made investments to increase flexibility in North America and are well positioned for different types of growth, particularly specialty can growth; we may continue to do marginal investments to tune the network. In Brazil, we have good capacity availability; we put a lot into the Northeast where we still need to grow into that. The Southeast is a bit tighter, but with network improvements we have space in Brazil. Nothing planned there in the short term.

Operator, Operator

And we'll move to Gabe Hajde with Wells Fargo.

Richard Carlson, Analyst - Wells Fargo (Sitting in for Gabe Hajde)

This is Richard Carlson on for Gabe this morning. First, you mentioned that you don't have direct exposure to the conflict in the Middle East, but some competitors do. Are you seeing any change in the marketplace from competitors saying they're having a hard time getting metal or energy supply they need?

Oliver Graham, Chief Executive Officer

Not really. Most of the impact is occurring in regions with facilities being stopped or particularly to the east of the region. Markets that are supplied with energy out of the Gulf, like India, are where the impact is landing, not in Europe where there are more developed supply chains and much less direct exposure to the region. So we're not seeing any near-term impact in Europe.

Richard Carlson, Analyst - Wells Fargo (Sitting in for Gabe Hajde)

Your plants are all natural gas, right?

Oliver Graham, Chief Executive Officer

We operate with a mixture of gas and electricity.

Richard Carlson, Analyst - Wells Fargo (Sitting in for Gabe Hajde)

As we think about the cadence for the year, you had good momentum going into Q2. Has your Q2 outlook changed over the past couple of months? It seems like you're a little more front-end loaded for the year. Has your guide changed from what you thought it would be two or three months ago?

Oliver Graham, Chief Executive Officer

No, I don't think so. To the extent there are different impacts from when we first issued guidance, they're mostly sitting in the second half, either a little bit of input cost inflation or caution around geopolitical developments and their inflationary impact. We're in Q1 and have not seen how the conflict plays out. We're being cautious. To the extent we're adjusting slightly, it's more in Q3 and Q4 where we're not putting through all the gains made in Q1. Q2 is sitting pretty much where we had it.

Stefan Schellinger, Chief Financial Officer

Agree.

Operator, Operator

Ladies and gentlemen, that concludes our Q&A session for today. I'll turn the conference back to Oliver Graham for any additional or closing remarks.

Oliver Graham, Chief Executive Officer

Thanks, Lisa. Thanks, everyone, on the call. Just summarizing, in the first quarter, we reported strong adjusted EBITDA growth of 15% versus the prior year, significantly ahead of guidance and particularly driven by a strong performance in Europe. That is a testament to the resilience of the industry and of AMP. In the face of the current geopolitical environment, we reaffirm our guidance for 2026 full year adjusted EBITDA in the range of $750 million to $775 million, supported by our robust input cost pass-through mechanisms and our energy hedging arrangements. With that, we'll sign off and look forward to talking to you again at our Q2 results. Thank you.

Operator, Operator

This concludes today's call. Thank you for your participation. You may now disconnect.