ARD - Ardagh Group S.A. - Second Quarter 2019 Results

LUXEMBOURG, July 25, 2019 /PRNewswire/ -- Ardagh Group S.A. (NYSE: ARD) today announced its results for the second quarter ended June 30, 2019.

Paul Coulson, Chairman and Chief Executive, said "Our second quarter performance was in line with our expectations, led by strong performances in our Metal Packaging Americas and Glass Packaging Europe divisions. The recently announced combination of our Metal Packaging Food & Specialty business with Exal to form Trivium Packaging, a new global leader in metal packaging owned by Ontario Teachers' and Ardagh, is an important strategic step for the Group." 

• Revenue of $2,268 million increased by 1% on a constant currency basis;
• Adjusted EBITDA of $395 million increased by 5% at constant exchange rates;
• Earnings per share for the quarter of $0.29, an increase of 16%;
• Adjusted earnings per share of $0.48 (2018: $0.51);
• Adjusted EBITDA growth in three of four segments, led by Metal Packaging Americas and Glass Packaging Europe. Cost reductions offset lower volumes in Glass Packaging North America, while Metal Packaging Europe was impacted by increased input costs;
• Global beverage can volume growth of 1% with volume/mix growth of 6%;  
• Metal Packaging Food & Specialty ("Food & Specialty") to combine with Exal Corporation to form Trivium Packaging ("Trivium"), a new global leader in metal packaging jointly owned with Ontario Teachers'. Ardagh will hold a 43% stake in Trivium and will receive cash proceeds of $2,500 million, to be used for debt reduction at Ardagh Group S.A. The transaction is expected to close in the fourth quarter of 2019;
• Full year 2019 outlook³ re-iterated, with third quarter Adjusted EBITDA of $410-$420 million

Summary Financial Information

Group

Revenue of $2,268 million decreased by 3% in the three-month period ended June 30, 2019, compared with the same period last year. On a constant currency basis, revenue increased by 1%, mainly due to the pass through of increased input costs, partly offset by lower volumes in Glass Packaging North America.

Second quarter Adjusted EBITDA of $395 million increased by 1% at actual exchange rates, compared with the same period last year. On a constant currency basis, Adjusted EBITDA increased by 5%, principally due to increased selling prices, including for the pass through of higher input costs, the impact of IFRS 16 of $24 million, and favorable volume/mix effects, partly offset by higher other operating costs.

Metal Packaging Europe

Revenue of $874 million decreased by 6% in the three-month period ended June 30, 2019, compared with the same period last year. On a constant currency basis, revenue increased by 1%, principally due to volume/mix growth and the pass through of higher input costs. Adjusted EBITDA for the quarter of $140 million decreased by 11% at actual exchange rates and 5% at constant currency rates, compared with the same period last year. The reduction in Adjusted EBITDA principally reflected higher input and other operating costs, as well as some adverse weather impact on beverage can volumes, partly offset by the $8 million impact of IFRS 16 and favorable volume/mix effects.

Metal Packaging Americas

Revenue increased by 1% to $549 million in the second quarter of 2019, compared with the same period last year. This was principally due to favorable volume/mix effects of 4%, as growth in beverage cans was partly offset by the impact of a plant closure in food & specialty in late-2018, as well as the pass through of lower input costs. Adjusted EBITDA of $83 million increased by 12% compared with the prior year, principally reflecting favorable volume/mix effects and the impact of IFRS 16, partly offset by higher operating costs.

Glass Packaging Europe

Revenue of $412 million decreased by 2% at actual exchange rates and increased by 5% at constant exchange rates, in the three-month period ended June 30, 2019, compared with the same period last year. Revenue growth principally reflected favorable mix, increased engineering activity and higher selling prices to recover increased input costs. Adjusted EBITDA for the quarter of $99 million increased by 16% at constant exchange rates, compared with the same period last year, mainly due to favorable mix effects, the impact of IFRS 16 and higher selling prices.

Glass Packaging North America

Revenue decreased by 5% to $433 million in the second quarter, compared with the same period last year, principally reflecting lower volume/mix. Adjusted EBITDA for the quarter of $73 million increased by 4%, compared with the same period last year, mainly due to cost savings from the Group's capacity realignment initiatives, the impact of IFRS 16 and higher selling prices to recover increased costs, partly offset by unfavorable volume/mix.

Combination of Food & Specialty with Exal

On July 15, 2019, the Group announced that it had entered into an agreement to combine its Food & Specialty Metal Packaging business, operating as part of the Metal Packaging Europe and Metal Packaging Americas segments, with the business of Exal, a leading producer of aluminum containers, to form Trivium, a global leader in metal packaging.

The combination of Food & Specialty with Exal, currently controlled by Ontario Teachers' Pension Plan Board ("Ontario Teachers"), will create one of the largest metal packaging companies in the world. Trivium will be headquartered in the Netherlands and will operate 57 production facilities, principally across Europe and the Americas, employing approximately 7,800 people.

Trivium will serve a diverse range of leading multinational, regional and local customers operating in a wide array of end markets, including food, seafood, pet food, nutrition, beauty and personal care, household care and premium beverages.

This complementary transaction will combine Food & Specialty's leading presence in Europe and North America, principally focused on tin-plate steel packaging, with Exal's leadership in Americas aluminum aerosol packaging. Trivium will produce an extensive and sustainable product range, backed by dedicated research and development resources, underpinning the businesses' reputation for customer service, quality and innovation.

Upon completion of the transaction, Ardagh will hold approximately a 43 per cent stake in Trivium, with 57 per cent controlled by Ontario Teachers'. Ardagh will also receive approximately $2,500 million in cash proceeds.

Upon completion, Ardagh intends to use the $2,500 million in cash proceeds from this transaction as follows:

a) Repay outstanding drawings under Ardagh's current asset-backed loan facility (and permanently reduce commitments) by $150 million;

b) Consider, based on the circumstances around the time of the completion date, closing derivative positions of approximately $5 to $10 million in out-of-the-money swaps;

c) Exercise the optional redemption provisions, at the applicable redemption premium, of Ardagh's existing 4.625% Senior Secured Notes due 2023 and 4.125% Senior Secured Notes due 2023, for total consideration of approximately $1,550 million;

d) Undertake an excess proceeds offer (as defined in the relevant indentures) of the 4.250% Senior Secured Notes due 2022 and 2.750% Senior Secured Notes due 2024 at par on a pro rata basis; and

e) To the extent any proceeds remain, call Ardagh's existing 6.750% Senior Notes due 2024.

Completion of the transaction is subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals and confirmation of the participation of certain Ardagh European entities in the transaction, which remains subject to works councils' consultation. Completion is also subject to closing of the debt financing announced by Trivium on July 15, 2019 and subsequently priced on July 19, 2019. The transaction is expected to close in the fourth quarter of 2019.

On July 19, 2019, Trivium Packaging Finance BV, a wholly-owned subsidiary of Trivium, priced an offering of $2,850 million in senior secured and senior notes, due 2026 and 2027 respectively, at a blended interest rate of approximately 4.8% after swaps.

Organisational Changes

As part of its long-term succession planning, Ardagh Group is making the following organisational changes:

Shaun Murphy will join Ardagh as Chief Operating Officer on September 16, 2019, reporting to Paul Coulson, Chairman and CEO. He will also join the board of Ardagh. Shaun, who is aged 52, recently completed a highly successful six-year term as Managing Partner of KPMG in Ireland. KPMG  Ireland, which is the country's largest professional services firm, employs over 3,000 people serving a wide range of domestic and multinational clients with a broad range of advisory services. Shaun has been a partner at KPMG for almost 20 years and served as the Lead Director on KPMG's Global Board from 2015 until earlier this year. 

Johan Gorter has decided to retire as CEO of Glass by the end of 2019. Following Johan's retirement, Martin Petersson (CEO Glass Europe) and Bertrand Paulet (CEO Glass North America) will report to Shaun Murphy.

Following the recent agreement to combine Ardagh's Food and Specialty business with Exal to form Trivium Packaging, David Wall has decided to step down as CEO of Ardagh's Metal Division by the end of 2019. Oliver Graham (CEO Metal Beverage Europe/Brazil and Group Commercial Director) and Claude Marbach (CEO Metal Beverage North America) will then report to Shaun Murphy. 

Earnings Webcast and Conference Call Details

Ardagh Group S.A. (NYSE: ARD) will hold its second quarter 2019 earnings webcast and conference call for investors at 3 p.m. BST (10 a.m. ET) on July 25, 2019. Please use the following webcast link to register for this call:

Webcast registration and access:

https://event.on24.com/wcc/r/2034962-1/B6EA3E16E08DF3D6A8A64873C2F3906F?partnerref=rss-events

Conference call dial in:

United States: +1855 85 70686
International: +44 33 3300 0804

Participant pin code: 63132553#

Slides and quarterly report

Supplemental slides to accompany this release are available at http://www.ardaghgroup.com/investors.

Second quarter results for ARD Finance S.A., issuer of the Senior Secured Toggle Notes due 2023, are available at http://www.ardholdings-sa.com/.

About Ardagh Group

Ardagh Group is a global supplier of infinitely recyclable, metal and glass packaging for the world's leading brands. Ardagh operates more than 100 metal and glass production facilities in 22 countries across five continents, employing over 23,000 people with sales of $9bn.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Non-GAAP Financial Measures 

This press release may contain certain consolidated financial measures such as Adjusted EBITDA, LTM Pro Forma EBITDA, working capital, operating cash flow, Adjusted free cash flow, net debt, Adjusted profit/(loss), Adjusted earnings/(loss) per share, and ratios relating thereto that are not calculated in accordance with IFRS or US GAAP. Non-GAAP financial measures may be considered in addition to GAAP financial information, but should not be used as substitutes for the corresponding GAAP measures. The non-GAAP financial measures used by Ardagh may differ from, and not be comparable to, similarly titled measures used by other companies.