Earnings Call Transcript - AMBP Q3 2025

Operator, Operator

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 Mr. Stephen Lyons. Please go ahead.

Stephen Lyons, Host

Thank you, operator, and welcome, everybody. Thank you for joining today for Ardagh Metal Packaging's Third Quarter 2025 Earnings Call, which follows the earlier publication of AMP's earnings release for the third 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 third 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.

Oliver Graham, CEO

Thanks, Stephen. We delivered a strong performance in the third quarter with adjusted EBITDA growth of 6% versus the prior year quarter or 3% on a constant currency basis. Our adjusted EBITDA result of $208 million was towards the upper end of our guidance with both segments performing broadly in line with our expectations. Adjusted EBITDA growth in the quarter was supported by shipments growth in Europe and North America, lower operational and overhead costs as well as favorable category mix. Although global volumes were below our expectations in the quarter, on a year-to-date basis, they are up over 3% versus the prior year. The beverage can continue to benefit from innovation and share gains in our customers' packaging mix, underpinning our growth expectations. We continue to progress our sustainability agenda and our recently published sustainability report highlights strong progress towards our targets in 2024, including a 10% annual reduction in Scope 1 and 2 emissions and a 14% reduction in Scope 3 emissions, with Scope 3 emissions now 25% below the 2020 baseline. We anticipate further good progress in 2025 and beyond. Turning to AMP's Q3 results by segment. In Europe, third quarter revenue increased by 9% to $625 million or by 3% on a constant currency basis compared with the same period in 2024, principally due to volume growth. Shipments grew by 2% for the quarter, driven by growth in energy drinks and faster-growing categories such as ciders, ready-to-drink teas and coffees, wines, and water. This growth offset continued weakness in the beer category, which represents over 40% of our European portfolio. Third quarter adjusted EBITDA in Europe increased by 4% to $82 million, in line with expectation. On a constant currency basis, adjusted EBITDA reduced by 4% due to input cost recovery headwinds, partly offset by the contribution from higher volumes and favorable category mix. Given the continued softness in the beer category, we now expect full year shipment growth for Europe of low single-digit percentage for full year 2025. As we look into 2026, we continue to expect the market to grow around 3% to 4% and for our volumes to broadly match that growth. In the Americas, revenue in the third quarter increased by 8% to $803 million, which mainly reflected the pass-through of higher input costs to customers, including the impact of the higher Midwest premium in North America. Americas adjusted EBITDA for the quarter increased by 8% to $126 million, in line with expectations due to lower operational and overhead costs and favorable category mix, partly offset by the impact of lower volumes in Brazil. In North America, shipments increased by 1% for the quarter, broadly in line with the industry, following stronger-than-expected growth during the first half of the year. Year-to-date, North America shipments are up by 5%, ahead of the overall industry. The slower rate of growth during the quarter reflects some moderation in industry growth rates as well as temporary operational challenges. These included a modest impact related to aluminum can sheet supply as well as some temporary plant and network issues. We continue to monitor the metal supply situation as we progress through Q4. If the supply chain performs as currently projected, we anticipate only a modest impact to our expected Q4 North America performance. Customer demand for nonalcoholic beverages in cans in North America remains strong. And as such, we maintain our guidance for full year North America shipments of a mid-single-digit percentage growth. Looking into 2026, we expect industry growth of a low single-digit percentage. We expect a somewhat softer outlook for AMP following some volume resets largely related to specific footprint situations. We anticipate 2026 being a transition year before good growth in 2027 on the back of some contracted additional filling locations and ongoing market growth. In Brazil, third quarter beverage can shipments decreased by 17%, largely due to a weak industry backdrop across all categories, with industry beer can volumes falling by around 14% due to adverse weather and weak household consumption. Our weaker performance in Q3 follows a strong performance in the first half of the year. Year-to-date, Brazil shipments are down 1% versus a mid-single-digit percentage decline for the rest of the industry. We expect an improved volume trend for Q4 compared to Q3, and hence, full year shipments for Brazil to be broadly in line with the prior year. Looking into 2026, we expect the Brazilian industry to return to growth and for our volumes to broadly track the industry. 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, CFO

Thanks, Ollie, and good morning, good afternoon, everyone. We ended the quarter with a robust liquidity position of over $600 million. The net leverage of 5.2x net debt over last 12 months adjusted EBITDA represents a decline of 0.4x of leverage versus Q2 2024, reflecting adjusted EBITDA growth. It remains our expectation that the 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 July. We expect maintenance CapEx of around $135 million, lease principal repayments of just over $100 million, cash interest of just over $200 million, and a small outflow in working capital. We now expect cash tax to be in the range of $35 million to $40 million, growth CapEx to be around $65 million, and a small cash exceptional outflow of approximately $50 million. Today, we have announced our quarterly ordinary dividend of $0.10 per share. And with that, I'll hand it back to Ollie.

Oliver Graham, CEO

Thanks, Stefan. So before moving to take your questions, just to recap on AMP's performance and key messages. Firstly, adjusted EBITDA growth in the third quarter of 6% was at the upper end of our guidance range with both segments performing in line with expectations. Adjusted EBITDA growth was supported by shipments growth in both Europe and North America by lower operational and overhead costs and a favorable category mix. The beverage can continue to outperform other substrates in our customers' packaging mix, supporting our growth. Reflecting our resilient performance, we are upgrading our full-year adjusted EBITDA guidance. Full year adjusted EBITDA is now expected to be in the range of $720 million to $735 million based on current FX rates. We expect full year shipments growth for AMP to be approximately 3%. Having made these opening remarks, we'll now proceed to take any questions that you may have.

Operator, Operator

We'll take our first question from George Staphos with Bank of America.

George Staphos, Analyst

Congratulations on the progress. My first question is about the effects you're seeing from demand elasticity and the higher realized or potential aluminum pricing from can sheet in both North America and Brazil. Additionally, I noticed that Brazil is down 17% due to weak industry trends, similar to what others have reported regarding weaker industry volumes in that region. Do you think some of this is due to a shift back to other substrates because of the increased aluminum prices? How should we consider that? Also, regarding elasticity, could you elaborate on what is included in your guidance for the fourth quarter and the outlook for 2026 on can sheet, understanding that you are not providing guidance for that year? What operational challenges are you facing, and how are you managing them, particularly regarding supply chain issues? What can you share on this?

Oliver Graham, CEO

Yes, regarding the first question, I don't believe we are experiencing significant demand elasticity at this time. Most customers have entered 2025 fairly hedged, so the impact of tariffs isn't likely to manifest in North America right now, and Brazil is showing a similar trend. I don't see it significantly affecting sales at this moment. However, there's more risk for 2026 as hedges will be rolled over, which could lead to higher aluminum costs influencing the supply chain. It will depend on whether our customers or retailers pass these costs onto consumers, and how consumers will respond in the current market environment. For North America next year, we expect market growth to be around 1% to 2%, reflecting some caution regarding potential inflation in the can. In Brazil, there hasn't been a significant shift back to 2-way glass; the share of cans has remained relatively stable. There seems to be a general volume weakness, particularly noted among major brewers, and this has been exacerbated by a notably poor winter. Additionally, there is a challenging consumer environment in the category, particularly for beer, and soft drinks have also struggled. Thus, Brazil is having a difficult year. Looking ahead to 2026, we anticipate a return to long-term trends, possibly low to mid-single digits growth. We aim to align with that expectation. For Q4, we are cautiously optimistic about the can sheet. There has been substantial disruption in supply chains, which began before the fire at a key facility. That incident made matters worse. Currently, we believe we are managing the situation and it will improve as the quarter progresses, allowing for alternative supply sources to be utilized. We also have one of the two new mills in North America coming online, which is beneficial. At this time, we're hopeful that we can navigate through these challenges with minimal impact on North American performance. However, we estimate that operational issues have cost us about 1 to 2 points of growth in Q3, due to underperformance at several plants and supply chain stress from seismic events.

Operator, Operator

We'll take our next question from Matt Roberts with Raymond James.

Matthew Roberts, Analyst

First, on the 2026 growth in North America, it seems like there's a lot of innovation, potential shelf space distribution opportunities within your energy portfolio. So what's behind that transition here? And given your exposure, why in line with the market in North America?

Oliver Graham, CEO

Yes, that’s a great question. We’ve discussed this in previous calls. There has been significant contract reset activity in North America over the past few years, but that is beginning to stabilize. We are generally pleased with the outcomes and feel confident in our contracts through 2028 and beyond. However, we anticipate some challenges in 2026, particularly in the 12-ounce segment due to certain resets in that area. These resets are related to specific situations, such as a customer with a long freight route from the COVID years. We considered building capacity but opted against it due to overall volume concerns. Consequently, there is now a plant closer than ours, which leads to a natural shift. Additionally, a competitor built a plant during this expansion period that is now nearer to a key customer, contributing to these market adjustments. As you know, beverage cans are heavily impacted by freight, making location crucial. Overall, we are comfortable with our current position. We project that 2026 will be a softer year in North America, where we may lag behind the market. However, for 2027, we expect good growth, gaining a few more filling locations, and we see the market rebounding. The innovation in the can segment and the strong performance of the energy category this year reinforce our optimism. We may not see the same level of growth next year, but it remains an important part of our portfolio, and we are hopeful about these categories moving forward.

Matthew Roberts, Analyst

Right, right. And then speaking of capacity and footprint, last quarter, you noted potential for adds in Europe. I believe it was Southern Europe, but recognizing these projects are long term in nature, has the volume outlook changed either the timing in regard to any potential projects? Or are you still expecting Europe to be pretty tight and needing additional lines in the future? And any early indications that how you think about CapEx in 2026?

Oliver Graham, CEO

No. No, we don't see any change to the timing. So I mean, I think that the Europe market is pretty tight. We're particularly tight on certain sizes, and we'll address that. That definitely cost us some growth this year. Again, it's sort of specialty sizes in the season. We weren't completely able to follow and that cost us a bit of growth Q2 and probably persisted into Q3. So we'll do some projects around that in the off-season. And then, yes, we're running pretty tight. We've got some room for growth with continued improvement in the existing footprint, but we don't see any change to the timing of needing new capacity. Europe is a long-term growth market. It's been talked about on other calls. We're talking 3% to 4%. Some years, it's been more, some years a bit less, but it's been very consistent as per capita can penetration grows. So yes, we don't see anything. It's obviously had a bit of a weak summer, particularly in the beer category, but we're very optimistic about that market. And as we said in the remarks, we see ourselves growing in line with the market in '26.

Operator, Operator

We'll go next to Stefan Diaz with Morgan Stanley.

Stefan Diaz, Analyst

Maybe just sticking with Europe. So obviously, the can continues to outperform underlying liquids volumes in the region. But in your opinion, how much more runway does the can have for outperformance? Like, for example, if overall liquid demand sort of remains kind of flat to down in Europe, can the can still grow in 2026, '27 and beyond?

Oliver Graham, CEO

Yes, definitely. So I think if you look at the things that drive the growth, I mean, there's still significant underpenetration of cans relative to other geographies. Some of that is legacy with the German deposit scheme that took all cans out of the German market. So you still see German can growth at very high levels, obviously, a big market. You have growth out of 2-way and plastic in different parts of the region, Eastern Europe. We have the ongoing sustainability advantages of the can relative to other substrates. And obviously, you have in Europe, particularly the energy cost situation that's impacting glass. So we see a lot of runway for growth for the can in Europe. And I think that view is shared right across the industry and is backed up every quarter. If we look at our performance in the quarter, when we look at our markets that we were in, we were a touch behind, but only a touch behind. So I think there are always geographic and category mix impacts in individual company growth rates. But overall, we're happy with our performance, and we definitely see a lot of runway for can growth in Europe in the next few years, yes.

Stefan Diaz, Analyst

Great. That's helpful. Could you touch on quarter-to-date trends by geography, specifically detailing Brazil, especially considering the weak performance last quarter at the industry level and the busy season approaching there? Also, if possible, could you clarify the IFRS 15 contract timing benefit? Is there a chance this could pose a challenge in the fourth quarter?

Oliver Graham, CEO

Sure. I believe that the trends for the current quarter look good and are consistent with our guidance across all regions. Brazil is performing significantly better than we anticipated. If we reach the upper end of our guidance, we expect Brazil to show no growth year-on-year, which indicates growth in the fourth quarter. In October, we are already seeing much better performance compared to the third quarter, so there is improvement. However, it is still somewhat weak, and we are maintaining a cautious outlook in our guidance, but it's definitely an improvement over Q3. Europe and North America are meeting our expectations as well, suggesting a reasonable level of stability in our market forecasts at this time. Regarding IFRS 15, it accounts for just a couple of million dollars. I don't anticipate any significant issues for the fourth quarter, but I'll let Stefan elaborate on that.

Stefan Schellinger, CFO

No, I don't think we expect a major headwind in Q4 from IFRS. And sort of, yes, it's sort of around a couple of million dollars sort of in the Americas and then also a few more in sort of the European segment. But net-net, yes, we don't expect a major headwind from there.

Operator, Operator

We'll go next to Josh Spector with UBS.

Joshua Spector, Analyst

I just had 2 questions. One on the cost side is within your comments, you talked about less input cost recovery in Europe. I assume that's non-metals related, but can you talk about kind of what that is and if that is something that can be recovered? And then with North America with some of the temporary network issues you've called out, I don't know if you can size that at all? And is that something that's resolved? Or is this kind of just an effect of a tighter market maybe leading to inefficiencies that persist?

Oliver Graham, CEO

Sure. Starting with North America, I believe those issues are resolved as we approach Q4. They were likely a result of our strong growth in the first half, particularly with certain sizes. During the summer, we managed the shortage across various sizes, but it particularly affected the 12-ounce category in Q3. I mentioned earlier that we may have missed out on 1 to 2 points of growth in North America in Q3 due to metal supply challenges and other network and plant issues. However, we see those as fully resolved going into Q4. Our main focus now is on the metal supply, and while we are cautiously optimistic, nothing has changed regarding input costs. As we discussed earlier this year, European aluminum prices remain a concern, a direct result of the Ukraine war and the subsequent energy spike. We had managed to withstand this for several years, but eventually, the rise in energy and aluminum prices affected us this year. Other players may experience different impacts based on their supply mix, but there is nothing new here; it aligns with what we discussed earlier in the year.

Operator, Operator

We'll go next to Arun Viswanathan with RBC Capital.

Arun Viswanathan, Analyst

I just wanted to get your thoughts on EBITDA and I guess, growth as you look into '26. So it looks like you're kind of on a $725 million or so run rate on an annualized basis. If you think about maybe low single-digit growth as you discussed for '26, it seems like you are executing relatively well. So does that translate to, say, maybe mid-single-digit growth on the EBITDA line? And then maybe is there any further leverage as you delever? Or how should we think about that progressing forward as you look at it?

Oliver Graham, CEO

Yes, sure. Look, obviously, we don't guide '26 until our Q4s, and there's good reason for that. We're still rolling up the budget and all the detail. And also, there's still, at this time of the year, quite a bit of volume still under discussion or moving around. So we won't be guiding specifically. But if I just talk at the highest level, so I think I didn't say we were growing low single digits next year. I think what I said was Europe, we see growing 3% to 4% and us broadly in line. I said I think Brazil will grow low to mid, us broadly in line. And I said I think North America will grow 1% to 2% and will be softer than the market. So we don't yet have a global number. I think we definitely see earnings growth in '26 over '25. So some of those growth positions, particularly Europe, Brazil, we also see good operational cost savings. We've got a lot of opportunity in plants, in freight, in lightweighting, the usual places where can makers make operational cost savings, input costs, we're hopeful for '26 as well at this point. And obviously, we'll be keeping a tight eye as we always do on SG&A. Mix, we'd hope to be a tailwind '26. So we see a number of areas where we see earnings growth in '26, and we definitely see earnings growth over 2025, but we won't guide specifically on that until February.

Arun Viswanathan, Analyst

Great. And then maybe we can just discuss Europe just briefly. So in North America, we obviously saw a nice proliferation of new categories in nonalcoholic beverages. Could you just discuss maybe where we are in that trajectory within Europe? Is there maybe a tailwind that's coming? Or are we obviously already seeing it? And would you expect that to drive your results a little bit higher? Or would you be still maybe below the market because of the beer exposure?

Oliver Graham, CEO

Yes. I mean we saw a bit of that in Q3, as I mentioned. So I mean, if you look where our Q3 growth came from, it came particularly out of the energy category, a bit like North America, came out of some of these faster-growing categories like ready-to-drink teas, coffees, wines, waters. We're strong in all those categories. So we definitely saw that. But I think the other piece with Europe, I think we also see general soft drinks in growth with substitution of plastic and also some 2-way systems being substituted still. So it's definitely not reliant on those more innovative categories to get growth in Europe. You can get growth fully in the core, if you like. And then I think what we're saying for 2026 is absolutely that this looks like a poor year for beer. There's no particular reason to believe that continues. So assuming beer stabilizes more into normal growth rates, then we would be in the 3% to 4% range, and that would be very good growth for all the can makers in Europe.

Arun Viswanathan, Analyst

If I can just squeeze in one last one. Do you think the recapitalization or the new structure might affect your operations, or does it provide a new perspective on capital allocation? Or is it not really significant?

Oliver Graham, CEO

Yes. I think too early to say anything on it. Obviously, the transaction hasn't closed. It's progressing well from what we understand, but too early to comment on anything, I think, with relation to that.

Operator, Operator

We'll go next to Mike Roxland with Truist Securities.

Michael Roxland, Analyst

Congratulations on your progress. I wanted to follow up on a comment you made earlier regarding the lost growth in Europe. You also mentioned in the last quarterly call that you identified one or two points of growth in Europe because you couldn't transition to smaller formats. You've seen good growth in soft drinks and energy beverages, but given that your beer market share is over 40% in Europe, you weren't able to make that shift. Could you explain how you plan to make that transition? How do you intend to become more agile in targeting those growth categories to potentially reduce your reliance on beer? It seems like there wasn't much of a shift in the third quarter, so could you share your plans for how you'll adjust your mix to capture stronger growth opportunities in Europe, especially looking ahead to the fourth quarter and early 2026?

Oliver Graham, CEO

Yes, we're working on several projects in the network to convert lines and make them more flexible, allowing us to respond better during the season. We have plans for Q4 and Q1 that will position us more favorably in Q2 and Q3 next year. Additionally, as we expand our capacity in the coming years, we will ensure we are prepared to meet the growth demands in the market. We believe that once we execute these upcoming projects, we will be in a strong position.

Michael Roxland, Analyst

Got it. And when you think about some of the conversions that you're doing or the flexibility that you're adding, when you add new lines, I guess, are you going to build those new lines with this functionality, with this flexibility to be able to switch sizes more easily in case market dynamics change?

Oliver Graham, CEO

Yes, definitely. I mean, it costs a lot less if you do it at the beginning than when you try and retrofit, especially when you try and retrofit much older lines. So absolutely, I think it makes a lot of sense at the minute. The market is quite dynamic with different products coming to market, and we've seen in different summers, different products doing better or worse. So yes, it definitely makes sense for us as we build out new capacity to put that flexibility into the lines for sure.

Michael Roxland, Analyst

Got it. Okay. And then my last question is on North America. You mentioned the network issue has been resolved, and you remain optimistic on the metal supply issue resolving itself at some point. But fair to say, is there a risk to that 1% to 2% growth that you're targeting for North America next year should these metal supply issues persist into 2026?

Oliver Graham, CEO

Yes, to clarify, the 1% to 2% refers to market growth. We anticipate experiencing slightly slower growth than that. I do not foresee any risk to the industry or our own metal supply for next year. Currently, we are ramping up one of the two new mills, which is very beneficial for our situation. We expect Novelis to resolve their operational challenges, and they are making significant efforts to address those. Additionally, everyone in the market is successfully sourcing alternative aluminum supplies. Therefore, considering the flexibility within our supply chain, the improvements being made, and the new mill coming online, I do not expect any risk to industry volumes or our volumes for metal supply in 2026.

Operator, Operator

We'll go next to Anthony Pettinari with Citi.

Anthony Pettinari, Analyst

Ollie, I think you talked about kind of a bad year in beer in Europe, maybe not expected to repeat next year. And I'm just wondering if you can talk a little bit more about sort of the puts and takes there in terms of what you think really drove the weakness in Europe this year, whether it was consumer, weather? And then, I mean, in North America, there's been a lot of discussion around secular pressure on beer, given lifestyle changes, especially with younger consumers. Does that have a parallel in Europe? Or just wondering if you can kind of give us your big picture thoughts on beer into next year?

Oliver Graham, CEO

Yes, I think it's definitely too early to determine a lasting change in Europe. We don't have the same variety of products there as we do in North America, particularly with other alcohol options that have similar drinking profiles. This year has not been great for us, and I don't believe weather has played a significant role. There is clearly some weakness among consumers affecting the category. We typically find out later what strategies the key players implemented, including promotions, and we don't have all that information yet. My perspective is that this is a large category with some strong competitors, and I believe they are not satisfied with this year's performance and will likely devise strategies to improve things by 2026. As I mentioned, I feel it's still too soon to declare any significant change in drinking habits in Europe.

Anthony Pettinari, Analyst

Got it. Got it. That's helpful. And then based on kind of an early view, do you expect that the aluminum conversion cost headwinds maybe continue in Europe next year? Or are there maybe some savings that we should kind of think about that could help you reach that sort of normalized operating leverage? Or just how should we think about that?

Oliver Graham, CEO

I don't think we think there's necessarily savings, but there's no question that the step-up that we had this year moderates very significantly. So this was our step-up. I think if you look back over '23, '24, we really held it back despite the increase in energy costs that had flowed through. So this is where we took it. I mean the European market is tight on aluminum. So I don't see a huge savings opportunity there until there is more capacity put into the market; it needs that. But fortunately, there are significant import routes that are pretty competitive. And so I don't also see a major headwind, and we'll be exploiting on those routes. But yes, no savings, I think, but a definite moderating of some of the headwinds that we had this year.

Operator, Operator

We'll go next to Gabe Hajde with Wells Fargo Securities.

Gabe Hajde, Analyst

I think earlier this week was the first time we heard there might have been some movement regarding contracts and possibly customers, particularly on the private label side. You mentioned that next year there will be some changes to your system, which may lead to slightly underperforming the market. As you're negotiating with customers, what key points are they discussing? I understand you already pointed out the importance of proximity to customer filling sites, but I'm curious about how price, service levels, quality, and other factors are influencing their decisions.

Oliver Graham, CEO

Certainly. As I mentioned earlier, the primary factor we've encountered has been the issue related to our footprint. Back in 2021 and 2022, we intended to add capacity in the northern region, but the situation became very tight. This led us to fulfill a contract from a long freight lane. Since we chose not to increase capacity, we still have the contract for a few years, but once it expires, it will naturally revert to a closer can plant. On the flip side, the new capacity in North America has altered the footprint dynamics for our customers, giving them access to plants that are now closer than before. We also faced a situation with one customer who, mid-process, conducted their own footprint review, which resulted in the closure of a filling location we served. Overall, the main reason for softness in 2026 can largely be attributed to footprint changes. The market is competitive, but it's more in line with normal conditions after several tight years during COVID. We haven't received any specific concerns regarding service, as we consistently achieve high ratings and positive feedback in service and customer support. Therefore, we're mainly discussing changes related to footprint and the availability of capacity in the market for customers to make adjustments.

Gabe Hajde, Analyst

I have two questions regarding aluminum. Earlier this week, it was mentioned that all-in aluminum costs have increased above the all-time highs we experienced during the pandemic. We were previously discussing about a penny and a half of inflation from raw material costs, but now it might be closer to $0.03 if we evaluate it at current market rates. I understand that customers hedge and likely roll that in three years ahead, so the impact won't be felt all at once. I'm curious if, when inflation occurs like this, companies typically adjust pricing on an annual basis. Additionally, we have noticed quite a bit of promotional activity in the first half of this year, particularly in the carbonated soft drink and energy drink sectors. Should we be considering anything regarding that? You mentioned a slight deceleration in volumes sold into the channel in the second half compared to the first half. Is there a possibility that industry volumes could decrease in the first half of 2026 and perhaps increase in the second half due to challenging comparisons?

Oliver Graham, CEO

Yes. I think it's a good question. Look, I think you can't say there's no impact from that level of increase of aluminum pricing. So I think you have to assume there's some risk of inflation on the shelf and that, that has some impact on volumes because the categories are elastic. I think trying to predict exactly what our customers and retailers do with that is a fool's game. I think it depends a lot on where they are. They've taken a lot of price the last few years. And so they've probably got some firepower, which I think they deployed this year. I think not because of any personally, I don't think it's because of any particular sort of tariff-related insights. I think it's more that they have got that firepower in their margin structures, and they can use it to drive volumes. And they are looking to balance cans versus plastic in their portfolios for all sorts of reasons. So I think predicting exactly what happens in '26 is very difficult to do. We're maintaining a 1% to 2% stance on North America growth for next year with us softer. And that's probably because we are being a little bit cautious around that issue. So yes, I think something is flowing through. You can't say it has no impact, but I think that hopefully, we see what we're expecting, which is that sort of growth rate.

Gabe Hajde, Analyst

Well, let's be honest, glass and other substrates are not immune, right? Like everything has embedded energy costs. So I'm curious.

Oliver Graham, CEO

No, that's really important. Sorry, Gabe, I was just going to add to that. Every quarter, we observe that cans are outperforming other substrates. When you consider the sustainability aspect, energy costs, and the fundamental cost structure of cans in North America, along with the recapitalization efforts we've made as can manufacturers and what our suppliers have done with can sheets, it's clear that the industry is significantly more efficient than it was a decade ago. This improvement will positively impact the overall cost structure. That's why I'm very optimistic about long-term can growth rates in North America. However, I do see a slight potential headwind from the tariff situation in the next 12 to 18 months.

Gabe Hajde, Analyst

Understood. Last one, and it's about the supply chain. It's been around 40 years since we've had new rolling capacity in North America. This does not account for the ingot cost or the Midwest premium cost that is included. It's mainly focused on localizing can sheet supply, which should improve logistics efficiency. We need to see what political changes might occur that could affect aluminum cost structures. Additionally, there are reports from Europe expressing frustration over exporting scrap to the U.S. as a potential way to bypass some tariffs. Is this a topic of discussion regarding the cost of aluminum or can sheet in Europe?

Oliver Graham, CEO

On the topic of North America, the mills are significantly beneficial for the industry, aiding both supply and long-term cost efficiency. They required investment-grade returns for their establishment, but those costs are now integrated into the supply chain, meaning we don't anticipate major changes. Having such a strong domestic supply is very advantageous as it reduces the reliance on imports and enhances overall industry quality. Regarding Europe, the scrap issue complicates efforts to evade tariffs. We have noted that the U.S. faces a scrap shortage due to problems in Mexico and China, affecting North American can sheet producers. While these dynamics will have consequences, we don't expect them to notably alter the current situation in Europe, and there is nothing specific to report on that front.

Operator, Operator

At this time, there are no further questions. I will now turn the call back to Mr. Oliver Graham for any additional or closing remarks.

Oliver Graham, CEO

Thank you, and thanks to everyone on the call. So just summarizing again, adjusted EBITDA in Q3 grew by 6% at the upper end of our guidance with both segments in line with expectations. And reflecting that resilient performance, we're raising our expectations for full year adjusted EBITDA. So with that, thanks for joining the call, and we look forward to talking to you again at our Q4 results.

Operator, Operator

This does conclude today's conference. We thank you for your participation.