Verallia: H1 2020 Results

Resilience of the Group in the context of the COVID-19 pandemic:

  • Revenue decrease limited to 4.1% on a reported basis
  • Adjusted EBITDA decline in line with revenue decrease
  • Further deleveraging

PARIS--()--Regulatory News:

Verallia (Paris:VRLA):

Highlights

  • Revenue decline of 4.1% to €1,275 million (-0.9% at constant exchange rates and scope) compared to H1 2019
  • In Q2 2020, revenue down by -9.6% to €630 million (-5.4% at constant exchange rates and scope) compared to Q2 2019
  • Slight decline of adjusted EBITDA down to €299 million in H1 2020 compared to €313 million in H1 2019
  • Adjusted EBITDA margin at 23.4% compared to 23.5% in H1 2019
  • Net income at €79 million
  • Improvement in net debt leverage to 2.5x adjusted EBITDA for the last 12 months, compared to 2.6x as at December 31, 2019
  • Dividend paid in shares for 87% of shareholders, limiting the impact on cash flow to €13 million in July
  • Transformation plan in France to adapt the organization to market changes and improve competitiveness

Despite the expected impact of the COVID-19 pandemic on activity in the second quarter, Verallia confirmed its resilience by posting a limited decrease in its revenue and a slight decline in its adjusted EBITDA margin over the first half of the year, while continuing to reduce its net debt. This performance reflects our agility and discipline in terms of both cost management and industrial efficiency. Once again, I would like to thank all our teams for their mobilisation throughout the crisis which enabled us to continue to serve our customers whose role is essential throughout the food industry supply chain. Lastly, we are permanently adapting the measures necessary to guarantee our teams’ safety and health.”, commented Michel Giannuzzi, Chairman and CEO of Verallia.

Revenue

Revenue breakdown by region

In € million

H1 2020

H1 2019

% Change

Organic growth (i)

Southern and Western Europe

880.3

928.3

-5.2%

-5.2%

Northern and Eastern Europe

283.3

274.7

+3.1%

+3.4%

Latin America

111.0

126.4

-12.2%

+20.8%

Group Total

1,274.6

1,329.4

-4.1%

-0.9%

 

 

 

 

 

(i) Revenue growth at constant exchange rates and scope. Measures referred to as being calculated at constant exchange rates are intended to present the relevant information at constant exchange rates between the two comparable periods (applying the previous period’s exchange rates to the current period’s figures).

In the first half of 2020, Verallia posted revenue of €1,275 million, down by -4.1% on a reported basis compared to the same period last year.
The impact of exchange rate variations was -3.2% over the first half (-€42 million), due primarily to currency depreciation in Latin America.

At constant exchange rates and scope, revenue decreased by -0.9% in the first half of the year (and by -2.7% excluding Argentina), with a sharp organic decline of 5.4% in the second quarter (7.9% decrease in volumes sold), as the impact of the COVID-19 crisis fully materialized. In comparison, organic growth was +4.0% in the first quarter of 2020. After posting a slight increase in the first quarter, sales volumes fell as anticipated in the second quarter, mainly in April and May. Selling price increases have been boosted by Argentina.
In addition, the mix deteriorated over the first half of the year mainly due to France, as a result of lower volumes sold in sparkling wine and spirits and of a shift by some consumers towards less premium products.

By region, revenue for the first half of the year breaks down as follows:

  • In Southern and Western Europe (SWE comprising France, Spain, Portugal and Italy) revenue fell by 5.2% on both a reported basis and at constant exchange rates and scope. All of the countries in the region experienced a decline in revenue over the first half of the year, but most notably France, where premium products exposure is greater. Dynamism in food jars in all countries was not enough to offset the decline in other categories. Sparkling wine and spirits suffered the most and were heavily penalised by the shutdown of HoReCas (Hotels, Restaurants and Cafés).
  • In Northern and Eastern Europe (NEE comprising Germany, Russia, Ukraine and Poland), revenue on a reported basis increased by 3.1% and by 3.4% at constant exchange rates and scope. The dynamism in jars and non-alcoholic beverages observed in the first quarter continued into the second quarter. Lower volumes, especially in Eastern Europe, were offset by sales price increases to compensate for cost inflation.
  • In Latin America (comprising Brazil, Argentina and Chile), revenue was down
    by -12.2% on a reported basis but up by +20.8% excluding foreign exchange effects (+5.0% excluding Argentina). Volumes in still wine increased in Argentina and Chile in the first half of the year, offsetting a softening Brazilian market since the end of Q1. In addition, sales price increases continued, particularly in Argentina, where pricing policy is still very dynamic in an environment that remains highly inflationary.

Adjusted EBITDA

Breakdown of adjusted EBITDA by region

In € million

H1 2020

H1 2019

Southern and Western Europe

 

 

Adjusted EBITDA (i)

195.8

219.8

Adjusted EBITDA margin

22.2%

23.7%

Northern and Eastern Europe

 

 

Adjusted EBITDA (i)

68.9

59.9

Adjusted EBITDA margin

24.3%

21.8%

Latin America

 

 

Adjusted EBITDA (i)

33.9

33.1

Adjusted EBITDA margin

30.6%

26.2%

Group Total

 

 

Adjusted EBITDA (i)

298.7

312.8

Adjusted EBITDA margin

23.4%

23.5%

 

 

 

(i) Adjusted EBITDA is calculated based on operating profit adjusted for depreciation, amortisation and impairment, restructuring costs, acquisition and M&A costs, hyperinflationary effects, management share ownership plans, subsidiary disposal-related effects and contingencies, plant closure costs and other items.

Adjusted EBITDA decreased by 4.5% (almost stable at constant exchange rates and scope) to €299 million compared to an adjusted EBITDA of €313 million in H1 2019. The negative impact from exchange rates reached -€13m over the first half, exclusively due to the depreciation of currencies in Latin America.
“Activity” (defined in the glossary in appendices) was strongly negative at -€26 million, corresponding to weaker sales volumes compared to H1 2019, and was partially offset by lower destocking. The reduced decrease in inventories is mainly due to only one furnace shutdown for repairs in H1 2020, compared to five in H1 2019. In H2 2020, six furnace shutdowns for repairs will take place compared to none in H2 2019.

The adjusted EBITDA margin decreased marginally to 23.4%, compared to 23.5% in H1 2019. On a quarterly basis, the margin was maintained at 23.4% in Q2 2020, compared to 23.5% in Q1 2020 and 24.5% in Q2 2019.
Despite the COVID-19 crisis that affected sales, the adjusted EBITDA margin showed resistance, thanks first and foremost to a positive spread1 and the continuous deployment of the Performance Action Plan (PAP). This led to a net reduction in cash production costs of €19 million.

Adjusted EBITDA breakdown by region:

  • Southern and Western Europe reported adjusted EBITDA of €196 million vs. €220 million in H1 2019 and a margin of 22.2% compared to 23.7% in H1 2019. This decline in margin was due to France, which suffered the sharpest drop in sales and the strongest product mix degradation, due in particular to the decline in sales of premium. Spain, Portugal and Italy showed good resilience in the first half, reporting a stable adjusted EBITDA.
  • In Northern and Eastern Europe, adjusted EBITDA amounted to €69 million, increasing its margin to 24.3% compared to 21.8% in H1 2019. This increase in margin is mainly the result of sales price increases notably in Eastern Europe, that offset lower volumes as well as an improvement in industrial performance.
  • In Latin America, adjusted EBITDA amounted to €34 million, for a margin of 30.6% compared to 26.2% in H1 2019. This improvement in margin can be attributed to the good performance of Verallia’s three pillars: volumes, positive spread and industrial performance, in a still unfavourable macroeconomic environment in Argentina and deteriorating in Brazil.

The increase in net income to €79 million results mainly from the improvement in the net financial income (expense) despite a decrease in operating income, penalised by the restructuring charges incurred during the semester.

The booked capital expenditure was €92 million, compared to €97 million in H1 2019. These investments were comprised of €64 million in recurring capital expenditure (5.1% of consolidated revenue), vs. €89 million in H1 2019 and €27 million in strategic investments (vs. €9 million in H1 2019) corresponding mainly to the new furnaces in Italy (Villa Poma) and in Spain (Azuqueca), the start-up of which will take place depending on market needs. In 2019, the majority of furnace renovations took place in the first half, whereas in 2020, they will take place in the second half. In line with expectations, the impact of disbursements was significantly higher in H1 2020 compared to H1 2019.

Operating cash flow2 for the period was €138 million, compared to €196 million in H1 2019. This decline can be explained by the decrease in adjusted EBITDA and the expected increase in disbursements related to investments, strategic investments especially. In addition, working capital requirements were well managed, with a decline in the number of sales days.

Capacity to deleverage

During the first half of the year, Verallia continued its deleveraging. As a result, net debt reached €1,476 million at the end of June 2020, or 2.5x adjusted EBITDA for the last 12 months, down from 2.6x at December 31, 2019 and 2.9x at the end of June 2019 (proforma excluding shareholder loan). This leverage ratio remains well below the maximum leverage ratio set out in Verallia’s Group financing documentation, which is at 5.0x adjusted EBITDA.
The cash conversion percentage remained at a high level of 69%. In addition, Verallia continues to benefit from strong liquidity3 of €899 million as at June 30, 2020.

Results of the Shareholders’ Annual Meeting’s votes and of the option to receive the 2019 dividend payment in new shares

With a quorum of more than 90%, the Shareholders’ General Meeting adopted, with approval rates above 90%, all the resolutions submitted to its vote.

This Shareholders’ General Meeting approved the payment of a dividend of €0.85 per share and decided to propose to each shareholder, in respect of the payment of the dividend for the financial year ended December 31, 2019, an option between the payment of the dividend in cash or in newly issued shares of the Company, each of these options being mutually exclusive.
The issue price of each new share to be delivered for payment of the dividend is €22.94, equal to a price corresponding to 95.02% of the average of the first trading price of Verallia shares on Euronext Paris over the 20 trading days preceding the General Shareholders’ Meeting, minus the net amount of the dividend, rounded up to the nearest euro cent.
The shareholders having elected to receive the 2019 dividend payment in shares represent 87% of the Company’s share capital; Apollo4, Brasil Warrant Administração de Bens e Empresas S.A.5, Bpifrance Participations and the FCPE Verallia, the main shareholders of the Company, have opted for a payment of the dividend in shares.

Transformation plan in France

Verallia announced a transformation plan in France to adjust its production capacity in France and improve its industrial performance to respond to the changes in the French market (decline in domestic still wine market, competition from imports from more competitive foreign glassmakers operating in neighboring countries or recent slowdown in exports) by adapting its organization.
This project includes the non-reconstruction of one of the three furnaces at the Cognac site that is coming to the end of its service life at the end of the year and mainly produces bottles for the wine market.
New flow-based industrial organizations enabling greater empowerment and industrial efficiency should be deployed across the seven sites of Verallia in France. Those organizations have already been successfully established in the Group’s other European countries.
This plan favours voluntary departures, whether as part of a Voluntary Redundancy Plan, Early Cessation of Activity, or other specific measures for certain categories of personnel. Around 150 jobs are expected to become redundant for the seven factories of Verallia in France.
The information-consultation procedures with employee representative bodies are under way.

Success of the 2020 employee shareholding offer

Almost 3,300 employees (i.e. 42% of eligible persons worldwide) took part in the Group’s fifth employee shareholding offer (first offer since Verallia’s IPO in October 2019) at a unit subscription price of €18.876. In France, the operation was well received, with nearly 77% of eligible employees subscribing.
The total investment by the Group’s employees (including the company’s matching contribution) amounted to €20m.
As a result, employee shareholders now hold 3.3% of Verallia’s share capital, directly and through Verallia’s FCPE (corporate mutual fund) and the rate of employee shareholders reaches approximately 37%.

2020 and mid-term Outlook

The critical environment due to the COVID-19 pandemic and the persistent uncertainty linked to the duration of the crisis had led the Group to withdraw its 2020 objectives and makes financial forecasting exercises for 2020 still difficult. Nevertheless, the Group believes that the second quarter of 2020 should be a low point in terms of sales volumes and that the following quarters should show more favourable volume momentum.

For the year 2020, volumes are expected to be down by around -5% compared to 2019. Under these assumptions, adjusted EBITDA forecast for this year should be slightly above that of 2018, that amounted to €543 million.

The furnace repairs planned in the second half 2020 will be extended in time to proactively decrease the level of inventories. This will result in destocking admittedly negatively affecting EBITDA over the semester but better positioning the Group for a recovery in 2021 while improving cash starting this year.

Moreover, in 2020 the Group will continue to deleverage after dividend payment.

In addition, Verallia continues to implement measures to variabilize costs, to monitor very closely the working capital and to improve the supply chain to better serve clients. All investments remain under tight control and recurring investments will be maintained at around 8% of annual consolidated revenue.

As regards the Group’s mid-term financial objectives (2020-2022) announced at the time of the IPO, Verallia believes that they remain relevant except the objective for a compound annual growth rate (CAGR) of consolidated revenue of between 3% and 5% for the period 2020-2022 given (i) the negative impact of COVID-19 on sales volumes in 2020 and (ii) a lower expected sales price increase against a backdrop of more moderate inflation in production costs than initially anticipated over the period.

Verallia confirms thus the other financial objectives between now and 2022, namely:

  • An adjusted EBITDA margin exceeding 25% in 2022, mainly due to (i) the growth in sales volumes and the improvement in associated operating leverage, (ii) the continuation of its dynamic pricing policy aimed at offsetting cost increases and (iii) the ongoing implementation of the performance action plan and the reduction of production costs;
  • The continuation of its disciplined investment policy aimed at maintaining recurring capex7at around 8% of consolidated annual revenue;
  • A net financial debt/adjusted EBITDA ratio of between 2x and 3x;
  • An annual dividend payout ratio exceeding 40% of consolidated net income, with an annual amount of at least €100m, subject to approval by Verallia's General Shareholders' meeting.

About Verallia Verallia is the leading European and the third largest producer globally of glass containers for food and beverages, and offers innovative, customized and environmentally friendly solutions.
The Group posted €2.6 billion in revenue and produced 16 billion bottles and jars in 2019. Verallia employs around 10,000 people and comprises 32 glass production facilities in 11 countries.
Verallia is listed on compartment A of the regulated market of Euronext Paris (Ticker: VRLA – ISIN: FR0013447729) and is included in the following indices: CAC Mid 60, CAC Mid & Small and CAC All-Tradable. For more information: www.verallia.com

The consolidated financial statements of the Verallia Group for the financial year ended 30 June 2020, which were subject to a limited review by the Group’s Statutory Auditors, were approved by the Board of Directors on 30 July 2020 and will be available on www.verallia.com.

An analysts’ conference call will be held on Thursday, 30 July 2020 at 6 pm, (CET) via an audio webcast service (live and replay) and the results presentation will be available on www.verallia.com.

Financial calendar

  • 29 October 2020: financial results for Q3 2020 - Press release after market close and conference call the same evening.

Disclaimer

Certain information included in this press release are not historical facts but are forward-looking statements. These forward-looking statements are based on current beliefs, expectations and assumptions, including, without limitation, assumptions regarding present and future business strategies and the environment in which Verallia operates, and involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements, or industry results or other events, to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include those discussed or identified under Chapter 3 “Facteurs de Risques” in the Universal Registration Document dated 29 April 2020, approved by the AMF under number R. 20-006 and available on the Company’s website (www.verallia.com) and the AMF’s website (www.amf-france.org). These forward-looking information and statements are not guarantees of future performances.

Forward-looking statements speak only as of the date of this press release and Verallia expressly disclaims any obligation or undertaking to release any update or revisions to any forward-looking statements included in this press release to reflect any change in expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. Such forward-looking statements are for illustrative purposes only.

This press release includes only summary information and does not purport to be comprehensive. No reliance should be placed on the accuracy or completeness of the information or opinions contained in this press release.

Some of the financial information contained in this press release is not directly extracted from Verallia’s accounting systems or records and is not IFRS (International Financial Reporting Standards) accounting measures. It has not been independently reviewed or verified by Verallia’s auditors.

This press release does not contain or constitute an offer of securities for sale or an invitation or inducement to invest in securities in France, the United States or any other jurisdiction.

APPENDICES

H1 Figures

In € million

H1 2020

H1 2019

Revenue

1,274.6

1,329.4

Reported growth

-4.1%

 

Organic growth

-0.9%

 

of which Southern and Western Europe

880.3

928.3

of which Northern and Eastern Europe

283.3

274.7

of which Latin America

111.0

126.4

Cost of sales

(1,002.9)

(1,057.4)

Selling, general and administrative expenses, and other

(80.1)

(77.9)

Acquisition-related items

(30.4)

(30.8)

Other operating revenue and expenses

(27.1)

(4.2)

Operating income

134.1

159.1

Net financial income (expense)

(19.5)

(54.8)

Profit (loss) before tax

114.6

104.3

Income tax

(35.3)

(33.1)

Share of net profit (loss) of associates

0.0

0.5

Net profit (loss)

79.3

71.7

 

 

 

Adjusted EBITDA (i)

298.7

312.8

Adjusted EBITDA margin

23.4%

23.5%

of which Southern and Western Europe

195.8

219.8

Southern and Western Europe margin

22.2%

23.7%

of which Northern and Eastern Europe

68.9

59.9

Northern and Eastern Europe margin

24.3%

21.8%

of which Latin America

33.9

33.1

Latin America margin

30.6%

26.2%

 

 

 

Net debt end of June (ii)

1,475.7

1,689.5

Last twelve months adjusted EBITDA

601

591

Net debt / last twelve months adjusted EBITDA

2.5x

2.9x

 

 

 

Total capex (iii)

91.5

97.4

Cash conversion (iv)

69.4%

68.8%

Change in operating working capital

(69.0)

(19.6)

Operating cash flow (v)

138.2

195.7

Strategic investments (vi)

27.2

8.9

Recurring investments (vii)

64.4

88.5

(i) Adjusted EBITDA is calculated based on operating profit adjusted for depreciation, amortisation and impairment, restructuring costs, acquisition and M&A costs, hyperinflationary effects, management share ownership plans, subsidiary disposal‐related effects and contingencies, plant closure costs and other items.
(ii) Excluding the shareholder loan between Verallia SA and Horizon Intermediate Holdings, its former parent company for 2019.
(ii) Capex (capital expenditure) represents purchases of property, plant and equipment and intangible assets necessary to maintain the value of an asset and/or adapt to market demand or to environmental and health and safety constraints, or to increase the Group’s capacity. It excludes the purchase of securities.
(iv) Cash conversion represents adjusted EBITDA less capex, divided by adjusted EBITDA.
(v) Operating cash flow represents adjusted EBITDA less capex, plus changes in operating working capital including changes in payables of fixed assets.
(vi) Strategic investments correspond to acquisitions of strategic assets that significantly enhance the Group’s capacity or its scope (for example, the acquisition of plants or similar facilities, greenfield or brownfield investments), including the building of additional new furnaces.
(vii) Recurring investments represents acquisitions of property, plant and equipment and intangible assets necessary to maintain the value of an asset and/or adapt to market demands and to environmental, health and safety requirements. It mainly includes furnace renovation and maintenance of IS machines.

Evolution of revenue per nature in € million during the first semester

In € million

 

Revenue H1 2019

1,329.4

Volumes

-56.3

Price / Mix

+43.7

Exchange rates

-42.1

Revenue H1 2020

1,274.6

Evolution of adjusted EBITDA per nature in € million during the first semester

In € million

 

Adjusted EBITDA H1 2019 (i)

312.8

Activity contribution

-26.0

Spread Price / Cost

+16.7

Net productivity (ii)

+19.3

Exchange rates

-13.2

Other

-10.8

Adjusted EBITDA H1 2020 (i)

298.7

(i) Adjusted EBITDA is calculated based on operating profit adjusted for depreciation, amortisation and impairment, restructuring costs, acquisition and M&A costs, hyperinflationary effects, management share ownership plans, subsidiary disposal‐related effects and contingencies, plant closure costs and other items.

(ii) Performance Action Plan (“PAP”) impact amounting to €26m.

Reconciliation of operating profit to adjusted EBITDA

In € million

H1 2020

H1 2019

Operating profit

134.1

159.1

Depreciation and amortisation (i)

139.6

141.2

Restructuring costs (ii)

19.1

1.9

Acquisition, M&A

0.0

0.0

IAS 29 Hyperinflation (Argentina) (iii)

0.7

(0.3)

Management share ownership plan and associated costs

1.8

5.4

Disposals and subsidiaries risks

0.0

0.0

Sao Paulo (Brazil) site closure

0.0

1.6

Other

3.4

4.1

Adjusted EBITDA

298.7

312.8

(i) Includes depreciation and amortisation of intangible assets and property, plant and equipment, amortisation of intangible assets acquired through business combinations and impairment of property, plant and equipment, including those linked to the transformation plan implemented in France.
(ii) Corresponds mainly to the transformation plan in France.
(iii) The Group applies IAS 29 (Hyperinflation) from the 2nd semester 2018.

Reconciliation of Cash conversion to adjusted EBITDA

In € million

H1 2020

H1 2019

Adjusted EBITDA

298.7

312.8

Capex

(91.5)

(97.4)

Cash flows

207.2

215.3

Cash conversion

69.4%

68.8%

Adjusted EBITDA and Cash conversion are alternative performance indicators within the meaning of AMF position n° 2015-12.

Adjusted EBITDA and Cash conversion are not standardized accounting measures that meets a single generally accepted definition by IFRS standards. They must not be considered as a substitute for operating income and cash flow from operating activities which are measures defined by IFRS, or as a measure of liquidity. Other issuers may calculate adjusted EBITDA and Cash conversion differently from the definition used by the Group.

Comparison first quarter and second quarter

In € million

Q1

Q2

 

2020

2019

2020

2019

 

 

 

 

 

Revenue

644.8

632.9

629.9

696.4

Reported growth

1.90%

 

-9.60%

 

Organic growth

4.00%

 

-5.40%

 

 

 

 

 

 

Adjusted EBITDA

151.3

142

147.4

170.8

Adjusted EBITDA margin

23.50%

22.40%

23.40%

24.50%

IAS 29: Hyperinflation in Argentina

Since the second half of 2018, the Group has applied IAS 29 in Argentina. The adoption of IAS 29 requires the restatement of non‐monetary assets and liabilities and of the income statement to reflect changes in purchasing power in the local currency, leading to a gain or loss on the net monetary position included in the finance costs.

Financial information of the Argentinian subsidiary is converted into euros using the closing exchange rate for the relevant period.

In the first semester of 2020, the net impact on revenue amounted to -€2.5m. The hyperinflation impact has been excluded from Group adjusted EBITDA as shown in the table “Reconciliation of operating profit to adjusted EBITDA”.

Consolidated Profit and Loss

In € million

H1 2020

H1 2019

Revenue

1,274.6

1,329.4

Cost of sales

(1,002.9)

(1,057.4)

Selling, general and administrative expenses

(80.1)

(77.9)

Acquisition-related items

(30.4)

(30.8)

Other operating income and expenses

(27.1)

(4.2)

Operating profit

134.1

159.1

Net financial income (expense)

(19.5)

(54.8)

Profit (loss) before tax

114.6

104.3

Income tax

(35.3)

(33.1)

Share of net profit (loss) of associates

0.0

0.5

Net profit (loss)

79.3

71.7

Attributable to shareholders of the Company

76.0

67.7

Attributable to non-controlling interests

3.3

4.0

Basic earnings per share (in €)

0.64

0.59

Diluted earnings per share (in €)

0.64

0.59

 

 

 

Consolidated Balance Sheet

In € million

30 June
2020

31 Dec.
2019

ASSETS

 

 

Goodwill

531.7

550.9

Other intangible assets

461.1

499.2

Property, plant and equipment

1,234.2

1,299.3

Investments in associates

0.6

0.6

Deferred tax

37.5

42.3

Other non-current assets

34.7

37.5

Non-current assets

2,299.8

2,429.8

Inventories

442.0

455.2

Trade receivables and other current assets

184.1

178.9

Current tax receivables

14.3

21.0

Cash and cash equivalents

388.2

219.2

Current assets

1,028.6

874.3

Total Assets

3,328.4

3,304.1

 

 

 

EQUITY & LIABILITIES

 

 

Share capital

403.8

400.2

Consolidated reserves

(100.6)

(14.0)

Equity attributable to shareholders

303.2

386.2

Non-controlling interests

35.6

33.4

Equity

338.8

419.6

Non-current financial liabilities and derivatives

1,767.1

1,584.0

Provisions for pensions and other employee benefits

128.8

133.0

Deferred tax

153.1

166.6

Provisions and other non-current financial liabilities

40.5

43.1

Non-current liabilities

2,089.5

1,926.7

Current financial liabilities and derivatives

98.8

225.9

Current portion of provisions and other non-current financial liabilities

68.3

51.9

Trade payables

350.1

383.6

Current tax liabilities

33.5

19.3

Other current liabilities

349.4

277.1

Current liabilities

900.1

957.8

Total Equity and Liabilities

3,328.4

3,304.1

Consolidated Cash Flow Statement

In € million

H1 2020

H1 2019

Net profit (loss)

79.3

71.7

Share of net profit of associates, net of dividends received

-

(0.5)

Depreciation, amortisation and impairment of assets

139.6

141.2

Gains and losses on disposals of assets

2.2

(1.8)

Interest expense on financial liabilities

18.6

39.4

Unrealised gains and losses on changes

0.2

-

Gain/loss on net monetary position (IAS 29, Hyperinflation)

2.0

3.2

Unrealised gains and losses on changes in the fair value of derivatives

(0.8)

2.6

Change in inventories

4.9

43.7

Change in trade receivables, trade payables & other receivables & payables

(23.4)

(66.4)

Current tax expense

40.0

41.3

Taxes paid

(16.5)

(27.2)

Changes in deferred taxes and provisions

13.8

(9.2)

Net cash flows from operating activities

259.9

237.9

Acquisition of property, plant and equipment and intangible assets

(91.5)

(97.4)

Increase (decrease) in debt on fixed assets

(50.4)

(11.7)

Acquisitions of subsidiaries, net of cash acquired

1.0

(1.8)

Deferred payment related to the acquisition of a subsidiary

-

-

Capital expenditure

(140.9)

(110.9)

Disposals of property, plant and equipment, intangible assets included related costs

(0.5)

2.7

Sale of equity-accounted securities

-

-

Disposals

(0.5)

2.7

Increase in loans, deposits and short-term borrowings

(1.6)

(1.8)

Reduction in loans, deposits and short-term borrowings

0.7

6.5

Changes in loans and deposits

(0.9)

4.7

Net cash flows from (used in) investing activities

(142.3)

(103.5)

Capital increase (reduction)

20.1

-

Transactions with shareholders

20.1

-

Capital increases of subsidiaries subscribed by third parties

-

7.2

Dividends paid to non-controlling interests by consolidated companies

(0.6)

(3.0)

Transactions with non-controlling interests

(0.6)

4.2

Increase (reduction) in bank overdrafts and other short-term borrowings

(129.9)

51.1

Increase in long-term debt

201.2

9.6

Reduction in long-term debt

(13.1)

(181.9)

Financial interest paid

(13.4)

(37.4)

Change in gross debt

44.8

(158.6)

Net cash flows from (used in) financing activities

64.3

(154.4)

Increase (reduction) in cash and cash equivalents

181.9

(20.0)

Impact of changes in foreign exchange rates on cash and cash equivalents

(12.9)

(1.2)

Impact of changes in fair value on cash and cash equivalents

-

-

Opening cash and cash equivalents

219.2

262.1

Closing cash and cash equivalents

388.2

240.8

GLOSSARY

Activity category: corresponds to the sum of the volumes variations plus or minus changes in inventories variation.

Organic growth: Corresponds to revenue growth at constant exchange rates and scope. Revenue growth at constant exchange rates is calculated by applying the average exchange rates of the comparative period to revenue for the current period of each Group entity, expressed in its reporting currency.

Adjusted EBITDA: This is a non-IFRS financial measure. It is an indicator for monitoring the underlying performance of businesses adjusted for certain expenses and/or non-recurring items liable to distort the company’s performance. The Adjusted EBITDA is calculated based on operating profit adjusted for depreciation, amortisation and impairment, restructuring costs, acquisition and M&A costs, hyperinflationary effects, management share ownership plans, subsidiary disposal-related effects and contingencies, plant closure costs and other items.

Capex: Short for “capital expenditure”, this represents purchases of property, plant and equipment and intangible assets necessary to maintain the value of an asset and/or adapt to market demand or to environmental and health and safety constraints, or to increase the Group’s capacity. It excludes the purchase of securities.

Recurring investments: Recurring Capex represent acquisitions of property, plant and equipment and intangible assets necessary to maintain the value of an asset and/or adapt to market demands and to environmental, health and safety requirements. It mainly includes furnace renovation and maintenance of IS machines.

Strategic investments: Capex corresponds to acquisitions of strategic assets that significantly enhance the Group’s capacity or its scope (for example, the acquisition of plants or similar facilities, greenfield or brownfield investments), including the building of additional new furnaces.

Cash conversion: Refers to the ratio between cash flow and adjusted EBITDA. Cash flow refers to adjusted EBITDA less Capex.

The segment Southern and Western Europe comprises production plants located in France, Spain, Portugal and Italy. It is also denominated as “SWE”.

The segment Northern and Eastern Europe comprises production plants located in Germany, Russia, Ukraine and Poland. It is also denominated as “NEE”.

The segment Latin America comprises production plants located in Brazil, Argentina and Chile.

Liquidity: Calculated as the Cash + Undrawn Revolving Credit Facility ‐ Outstanding Commercial Papers.

1 The spread represents the difference between (i) the increase in sales prices and mix applied by the Group after passing on to these prices the increase in its production costs and (ii) the increase in its production costs. The spread is positive when the increase in sales prices applied by the Group is greater than the increase in its production costs. The increase in production costs is recorded by the Group at constant production volumes and before production gap and the impact of the Performance Action Plan (PAP).
2 Operating cash flow represents adjusted EBITDA less capex, plus changes in operating working capital including changes in payables of fixed assets.
3 Calculated as the Cash + Undrawn Revolving Credit Facility – Outstanding Commercial Papers.
4 Acting through Horizon Investment Holdings, a company wholly owned by Horizon Parent Holdings, itself indirectly controlled by AIF VIII Euro Leverage, LP, an investment fund managed by an affiliate of Apollo Global Management, Inc.
5 Acting through Lepton Fund Ltd., a fund managed by BW Gestão de Investimentos Ltda., a wholly owned subsidiary of Brasil Warrant Administração de Bens e Empresas S.A.
6 This represents a discount of approximately 20% compared to the average Verallia share price on the regulated market of Euronext Paris over the twenty trading days preceding April 30, 2020.
7 Excluding capitalization of the right of use associated with the application of IFRS 16.

Contacts

Verallia Investor Relations
Alexandra Baubigeat Boucheron - alexandra.baubigeat-boucheron@verallia.com

Press
Verallia - Marie Segondat - marie.segondat@verallia.com
Brunswick - Benoit Grange, Hugues Boëton - verallia@brunswickgroup.com - +33 1 53 96 83 83

Contacts

Verallia Investor Relations
Alexandra Baubigeat Boucheron - alexandra.baubigeat-boucheron@verallia.com

Press
Verallia - Marie Segondat - marie.segondat@verallia.com
Brunswick - Benoit Grange, Hugues Boëton - verallia@brunswickgroup.com - +33 1 53 96 83 83