Buenos días y bienvenidos a la presentación de resultados del tercer trimestre de 2022 de Vidrala. La compañía estará representada por Raúl Gómez, Director Financiero, e Iñigo Mendieta, Responsable de Relación con Inversores. La exposición se realizará en inglés. En el turno de preguntas, se recomienda realizar las preguntas en inglés, aunque se atenderán también preguntas en castellano. En la página web de la sociedad, www.vidrala.com, encontrarán documentación de soporte a esta presentación, así como un enlace para acceder al webcast. Good morning and welcome to the conference call organized by Vidrala to present its 2022 nine months results. Vidrala will be represented in this meeting by Raúl Gómez, CFO, and Iñigo Mendieta, Head of IR. The presentation will be held in English. In the Q&A session, questions will be also answered in Spanish.
Nevertheless, it is strongly recommended to post questions in English in order to facilitate understanding of everyone. In the company website www.vidrala.com, you will find available a presentation that will be used as supporting material to cover this call, as well as a link to access the webcast. Mr. Mendieta, the floor is yours.
Hi, good morning to everyone, and thank you as always for the time that you dedicate to attend this call. As announced this morning, Vidrala has published its 2022 nine months results. Additionally, we have also published the results presentation that will be used as supporting materials to this conference call. Following this document, we will dedicate the first part of our exposition to briefly explain the figures released today, to devote afterwards as much time as necessary to discuss on the business performance in the Q&A session. Starting with the main magnitudes, in the nine months of 2022, we achieved our more relevant business figures, revenues greater than EUR 1 billion, an EBITDA of almost EUR 160 million, and a net income that is equivalent to an EPS, an earnings per share, of EUR 2.65.
Net debt at the end of the period stood at EUR 165 million, which is equivalent to a leverage ratio of 0.8x the reported EBITDA. Turning to slide four, we look at the top-line performance, analyzing the annual variation of revenue broken down by concepts to arrive at the reported figure of EUR 1.017 million. As it is shown in the graph, this figure is the result of an organic growth of 23.3%, and if we incorporate the effect of the currency, the reported variation amounts to 24%. Following the order of key business figures referred to at the beginning, we analyze now with the same breakdown the variation of operating income. 2022 nine months EBITDA amounted to EUR 158.9 million, which reflects an organic decline of -30%.
In reported terms, EBITDA decreased, sorry, by 29.9% in the period. As a result, these operating figures reflect an operating margin, EBITDA over sales, of 15.6%, which represents a contraction of approximately 12 percentage points compared to 27.6 percentage points registered in the previous year. Finally, net debt at the end of the period closed at EUR 165 million. As a result, the leverage ratio stands at 0.8 times the last twelve months EBITDA. Now, before turning to the Q&A session, I pass the word to Raúl so that he can extract the main conclusions or highlights and make additional comments that he considers appropriate.
Thanks. Thanks, Iñigo, for your great introduction. Thank you all for your time today in attending this presentation. Well, we are today making this conference call extraordinarily to further explain business conditions that have been far from normal during the third quarter of the year. As we had anticipated in our last conference call back in July, energy markets in Europe, particularly natural gas markets, have behaved extraordinarily volatile and inflationary during the summer, following the events we have seen around Russian supplies. Despite our high levels of protection, this extraordinary situation had an unavoidable impact on our margins. An impact that we do consider temporary. This deterioration of margins due to abnormal energy cost should not limit us understanding the reality of our business conditions. Demand for glass containers is growing solidly, exceeding expectations.
Our sales volumes are consequently increasing. Our operational efficiency level is at the best ever. Yes, obviously, our sales prices are not yet fully adapted to the reality of the underlying cost conditions. For now, to the remainder of the year, we expect our demand to remain strong. We are successfully implementing actions to mitigate energy inflation, and we are to progressively readapt our sales prices.
The combination of all of these give us confidence to reactivate our guidance on margins. We now expect our margins to recover progressively towards the level of 20% EBITDA over sales over the last quarter of the year. Consequently, this is more remarkable, we are today deliberately disclosing a new full year 2022 EBITDA guidance in value of more than EUR 200 million. This expected more normal level of profitability will be nothing but the starting point for the year 2023. In any case, in any event, we keep fully aligned with our strategic priorities, focused on the three key points, customer, cost, and capital. We promise ourselves that we won't get confused after such an extreme year. We do think that soon our margins will reflect the reality of our competitive industrial footprint and our strong commercial positioning.
In conclusion, we will invest with our customer in mind to expand capacities, to better serve our growing customers, to further improve our cost competitiveness, and to make our operations more sustainable. We will do it preserving our historical capital discipline, our solid financial position, and the focus on our bright long-term business prospectus. Okay, this completes our exposition. Now, we give way to the Q&A session.
Ladies and gentlemen, the Q&A session starts now. Questions by telephone will be answered first. If you wish to ask a question, please press zero one on your telephone keypad. Thank you. The first question comes from Francisco Ruiz from BNP Paribas, and please go ahead.
I have three questions. Raúl, you have commented about initiatives to mitigate the costs, the energy cost inflation. Could you be a little bit more precise on which are these initiatives? The second one is if you could give us a breakdown on the evolution of your free cash flow in this quarter. I mean, the debt has been reduced significantly from Q2. If you could give us a detail on working capital and CapEx and what you expect for the full year. Last but not least, it's on price increases. I mean, in the industry, I mean, there's a rumor of 20%-25% increase on price increases for next year, and probably not for next year, but also for now, almost.
Do the recent evolution of the gas prices change the mind and are you seeing the client more open to accept this or more reluctant? Thank you.
Okay. Paco, thank you very much. I will take the second question. Raúl will take the first and the last one. Okay. Regarding our free cash flow, working capital, CapEx, et cetera. For the figures here today, for the nine months, CapEx stands at EUR 80 million, okay? We would like you to understand that part of this CapEx or that we will face in the fourth quarter higher concentration of CapEx, as we already have previously announced, that is fully as planned, and that is related to our CapEx plan and to the investment that we are executing in Portugal, okay? Let's consider that CapEx for the full year could be something in the range of EUR 110 million-EUR 120 million.
This means that more than 40% of the CapEx of the annual CapEx will be concentrated in the fourth quarter. Working capital has slightly relaxed in the nine months. Overall, we see an impact in the nine months of EUR 75 million, approximately cash out, as you can imagine, affected by price increases, but normal average collection period. This means that for the full year will continue to be a cash out, and that's why we expect debt to moderately increase in the fourth quarter, something in the range of from current levels at a maximum of around EUR 200 million.
Okay. Paco, good morning. Well, regarding our energy cost mitigation initiatives, what we can say today is that our energy risk profile has changed quite significantly since our last reports, okay? In some regions, we are seeing prices decoupled from the very expensive central European natural gas price reference. In some other regions, we are seeing government market interventions, as is the case of the U.K. and Italy, that will theoretically limit inflation in future potential scenarios. In some other regions, we are being able or we are prepared to switch from natural gas to alternative sources of energy like diesel or similar, where our diesel prices are fixed and our.
This is relevant and our energy supply agreements give us some reasonable level of flexibility. Let's say that as a result of this, approximately today, 70% of our energy for the next two, three quarters are reasonably capped at below current hedgeable market levels. This also means that we are taking a big proportion of the benefit from the current recent market relaxation we are seeing in some regional natural gas export prices. This is a big factor for our expected margins recovery for now. Having said that, midterm hedgeable natural gas prices are still quite expensive, and this is the only argument we can use when we need to renegotiate our prices. Okay.
Going directly to your third question, our price increases, well, what we can say is that, despite this new energy, more relaxed profile we are seeing today, that we do consider basically internal to Vidrala, the reality is that looking at our margins, obviously our prices are not yet adapted to the reality of industry underlying manufacturing cost. The inflationary pressures that we have seen over the last two years have been quite intense, extraordinary, not only in the energy factor. It is very difficult to reflect these extreme circumstances immediately in our prices in a timely or efficient manner. Please keep in mind, you know that our prices are or were normally reviewed only annually or biannually. Today, we know that 1/3 of our sales are concentrated in contractual pass-through mechanisms under multi-year supply agreements.
Our different price adjustment formulas, reflected in these agreements, need some time to be fully efficient and cannot be fully efficient in such volatile markets immediately. I mean with this, that a number of our bigger customers, where we have long-term supply agreements, have enjoyed more moderate price reviews in 2022, following the nature of these mechanisms or these price adjustment formulas, that always implies some time delay. For them, we need now to reflect all the last year inflation. For the rest of our customers, we plan to re-initiate immediately additional price increases before the beginning of the next year. In conclusion, all in understanding this time or delay factor, we see our average sales prices increasing in 2023 by more than double-digit.
Despite price levels will somewhat depend following your question on the reality of cost, particularly on the reality of energy cost, we do see today our prices growing in 2023 by at least 20%.
Just a follow-up, Raúl, as you have such a good visibility on energy for the next three quarters you said, what's your expectation on energy inflation for next year? Keeping in mind that the energy prices remains at these levels.
Well, that depends on the different hedging structure or the different hedging position in each quarter. Okay? Without any hedging, the reality is that energy prices, hedgeable energy prices for 2023 in comparison with the average of 2022 are still positive, between +5% to +10%. This is the inflation every player can capture today, excluding any hedging distortion in 2022. Okay? Another reality is that the spot prices are quite below hedgeable midterm forward prices. Forward prices are the prices that we need to consider when we negotiate with our customers in terms of prices.
Having said that, in our particular circumstances, we are seeing energy inflation in 2023 after a very tough comparison basis, particularly during the first nine months of this year, something that is fully evident in our margin deterioration, that will be pretty much under control, pretty much flat. Please keep in mind that the energy markets are almost broken everywhere in Europe. It's particularly difficult to foresee what will happen. There are rumors that the European Commission will soon announce some market intervention over natural gas prices in Central Europe, something that we hope. Simultaneously, we are seeing export prices under a process of relaxation, particularly in regional references like Iberia and like the U.K..
All in, the reality is that prices are still particularly expensive, hedgeable prices particularly expensive in 2023. It's quite complex to navigate under the current conditions and, maybe, historical and financial hedging derivatives that has been used as a tool to control our risk is a risky tool to control our risk, in my opinion.
Thank you. The next question comes from Bruno Bessa from CaixaBank BPI. Please go ahead.
Good morning. Thank you for taking my questions. You mentioned inflation in terms of energy costs for the next year. Just wondering if you could give us an idea of the inflation you could see in the remaining cash cost components in 2023. This will be my first question. The second question, well, you mentioned the solid demand evolution in the industry, that the industry is with tight levels of stocks. Just trying to understand here if this is the reality for the industry customers, or if we are talking about stocks in the producers, in glass manufacturers.
This would be the second question. The third question, if you could provide us a little bit more visibility on your hedging policy for Q4 this year and as well for 2023, namely, what is the percentage of your needs that is covered, and also, if you could give us an idea of the price at which it is covered. Thank you very much.
Okay. Thank you. Thank you, Bruno. Good morning. Well, first question regarding inflation or deflation trends. We are not foreseeing, unfortunately, any particular deflation in any part of our cost structure, okay? Energy will be a main factor of volatility in 2023 as it has been in 2022 and 2021, and maybe we see some relaxation and maybe we see some negative, hopefully some negative variation in 2023, but that will only be the consequence of the expected energy market relaxation. You will be very prepared to follow this because our energy costs are that transparent, okay?
On the rest of our cost structure, in some cases we are more or less concerned, but the reality is that if you consider CPI levels are today across Europe at about 8%, probably surprising negatively any analyst in the macroeconomic context that will have an unavoidable consequence impact on our cost structure in 2033. It's very unlikely to see, if we exclude the energy factor, it's still very unlikely to see a real deflation in our cost structure. Probably it will take time for us, as for many other industries, to recover cost conditions of 2020, okay? If this is possible in the future, okay?
Having said that, what we need now is to readapt our prices to the reality of this underlying cost, even excluding extreme circumstances on the energy factor, and we do feel confident of our capacity to do this and our capacity to recover margins under the new reality of manufacturing cost, okay. Your second question is regarding inventory levels or organic demand trends across our regions of activity. What we can say today is that demand for glass packaging is growing almost everywhere, modestly but positively exceeding expectations. Maybe the recent pace of growth is lower in the U.K. than in Southern Europe, but this is really what you can imagine. This basically reflects the different demand fundamentals and the macro factors that you are very aware of.
Another factor to take in mind is, as you mentioned, is that inventory levels are tight across the industry, okay? This is not an exception for Vidrala. Inventory levels are particularly tight across the industry because in this industry, it takes time to expand capacity, and we have all been positively surprised by how solidly demand is performing. The combination of this solid demand performance, tight inventories, give us nothing but quite a level of visibility for top-line growth for a couple of quarters from now, despite any conditions on the macro context that we are very aware of. The third question is, well, regarding hedging. As I said before, our energy risk profile has changed significantly.
In some regions, our energy costs are to be automatically capped or protected by government interventions without any internal need of executing any additional hedging policy. Actually, after this market intervention, what we need to do is to remove, to wind up any potentially risky or speculative financial hedging derivatives, okay? This is the case of our natural gas prices for the next couple of months, let's say at least two quarters in the U.K. and in Italy. In other regions, we are prepared, and we have been switching from gas to other sources like diesel, as I said before, and diesel prices are also capped, okay? If natural gas prices drop down below diesel prices, we are very, very flexible to switch back to natural gas prices. That means that we are also basically capped to the level of the alternative use of diesel.
As a result of this, including that we still do have some hedging tools, historical or traditional hedging tools, the reality is that 70% of our energy consumption for the next two quarters are protected, but they are protected basically under a cap mechanism. I mean, we are, and we are taking almost all the benefit of the current relaxation we are seeing, the recent relaxation that we are seeing in some regional natural gas export prices. As I said before, this is a significant factor for us to be more confident on our capacity to recover margins, something that is the top first priority now.
Thank you very much. If I may just follow up on the second answer you gave regarding the stocks in the industry. Let me just be a little bit more specific, because we have been seeing some companies in other industries mentioning that their stocks were low, that demand was quite strong. But in the end, we are now seeing that stocks at the producers were low because there was a relevant restocking in the customers that led to abnormally high levels of stocks now that we are entering in a potential cycle downturn, and that have been impacting those companies.
I know also that for instance, in the cork stoppers business, stocks are at high levels, which is a bit the opposite of what container glass players are saying. What I'm just trying to understand is if these low levels of stock that you are seeing in container glass producers corresponds also to low levels of stocks in your customers, or if you are seeing an abnormal restocking from your customers post the pandemic and considering the strong recovery of consumption and tourism post-pandemic, that could lead to an abnormally high level of stocks in your customers over the next couple of quarters. Thank you very much.
Yeah. Thank you, Bruno. Well, let's consider that there are two factors. As you mentioned, there are two factors to consider, okay? First is the organic demand performance, organic demand trends. Okay, I assume that organic demand for glass containers across our regions of activity are growing so solidly that a percentage of this growth is due to probably abnormal non-recurrent circumstances. We still don't have all the answer of this, and we still don't have all the needed traceability, but we do assume that some of this is due to non-recurrent positive impacts. Like for example, some potential restocking on our customers or on the customers of our customers.
The reality is that if we do consider that most of these restocking should have ended after the summer period, the reality is that we are still today seeing quite a solid demand, quite solid demand conditions. Demand growth will nothing but relax in 2023 following the macro context and following the high comparison basis of comparison. Underlying, please do believe us that underlying demand conditions that we are seeing and the message that we are receiving from our customers are still quite solid for the next year, 2023. Okay. Evidently, we won't be immune. Demand for glass containers for food or beverage products won't be immune to a worsened macroeconomic context if that happens, but the starting point is quite solid. Okay.
The second factor is how quick, how efficiently this industry can be adapted in terms of expanded capacity, capacities to these organic demand conditions that are exceeding expectations. In this industry, it takes time to expand capacity. It takes time for projects to be fully executed to expand capacity. A number of our competitors, I understand that they have been running at full capacity. Vidrala has been particularly running at full capacity over the last two years. We do consider that our tight inventory levels are something that is more or less consistent with the inventory levels that we are seeing in the industry.
Even when we receive some feedback from our customers, we can see that probably our level of service, our inventory levels are even higher than the average of the industry. The combination of this will give us a lot of visibility for the year 2023. If you try to understand, I assume that this is what you are trying to do, if you try to understand what could be the consequence in the worst scenario of deteriorated macroeconomic context. We do think that the following underlying demand conditions, excluding potential non-recurrent factors and tight inventory levels across all the industry, not only the case of Vidrala, should give you visibility for top line, at least stability for the next, let's say, couple of quarters.
Okay. That's clear. Thank you very much.
Ladies and gentlemen, let me remind you, in order to ask a question, please press zero-one on your telephone keypad. Thank you. The next question comes from Luis De Toledo from ODDO BHF. Please go ahead.
Good morning. One question from my side, Raúl Iñigo. It's regarding the reclassification of the costs of CO2 emissions and energy that previously partially reported at the G&A level to the cost of goods sold. Is there any rationale behind that? Do you expect some changes? Does it follow your strategy to mitigate this cost and potentially bring some synergies and potential advantages in the future? Thanks.
Hi, Luis. Thank you. Thank you for your question. The only reasoning behind is that this has become a more relevant cost in the more recent years. We understood that this better reflected under cost of goods sold than separately, okay? It is now reported together with other energy costs, such as power and gas, okay? There is nothing more behind that change.
Thank you very much. It's very clear.
Thank you. The next question comes from Beltrán Palazuelo from DLTV. Please go ahead.
Hello, good morning, Raúl Iñigo. Thank you for taking the time. I have two questions. Regarding 2023, of course it's very uncertain yet, but with the price increases, exactly what type of margin are you looking to recoup? If you could give us, let's say a little background of what type of operations you're analyzing regarding M&A, or you think it's still very early and still very uncertain to really analyze in detail M&A operations?
Okay. Good morning. Thank you. Thank you, Beltrán. Your first question, well, is a little too soon to see how things are in 2023. It is evident, as I say, we have mentioned before many times that our top priority is to recover margins to normal levels. We do consider that our margins will progressively recover to some minimal normal levels within the last quarter of this year. The target, the public target is a minimum of 20% EBITDA over sales, and that will be the starting point for further recovery in 2023, okay? This is all we can say for now, but I assume that this is as much as you need, okay? Second question, M&A, well, the message in this point remains basically the same, okay?
Our top first priority is to recover margins. We do feel today realistically confident on our capacity to do this, as explained before. Frequently, in terms of our capital allocation priorities, we aim to saturate all potential brownfield growth opportunities. We are, let me remind this, we are to finalize over the next year significant expansions in our production facilities. Third, yes, we will analyze potential M&A opportunities, okay? Our financial position is quite solid, and we aim to secure sales to further diversify the business, to expand the range of services we offer to our customers and to be more and to have a more powerful, even more powerful, business profile. Opportunities are limited, and our level of prudence is always high.
What I can say is that, whatever we do in the future, even, Beltrán, even if we do nothing, that will be the result of a deep conscious analysis or evaluation. We can say that we are not a stop it. I can also add that any potential dramatic transformational deal, I mean, in terms of level of indebtedness or financial effort needed, is quite unlikely. You won't be, from a financial perspective, particularly surprised on whatever we do, okay? We will always remain disciplined in our financial approach, and we do understand the current business context. After such an extreme year, 2022, we are learning that it's time to extreme prudence, but also at the same time probably to extreme the desire of looking for opportunities, despite it seeming paradoxical.
Okay, this is basically where we are.
If I may, a follow-up regarding what you were saying about the double-digit price increases, and let's say you are looking for around 20%. Is there no backlash from clients? Because if we assume that, let's say we put for 2023, demand stays stable, you're saying your demand at the moment is stable growing. It's not the same to have a 21% margin, let's say, or 20% from a revenue standpoint of EUR 1.5 billion than of EUR 1 billion. So clients are not looking at that, say, maybe, okay, you were in 26%, 27%, 28% margins, but now if you're in 21% margins with that type of revenue, your return on capital is historically high. Aren't they pushing back?
Of course they are. Of course they will keep on pushing us in that sense. But our particular margins, our internal margins won't be an argument to be used commercially in terms of our pricing initiatives, okay? What is the only argument to be used today is the reality of underlying cost inflation across the industry, okay? Please keep in mind that before this energy crisis, excluding the evident distortion that is creating the different hedging policies across margins in the industry, across different competitors, Vidrala was by far one of the most profitable players in the industry. That was the result of our structural underlying cost competitiveness, and that was a result of our strong industrial footprint, particularly after our exit from Belgium. That remains there.
That too have been even expanded, because since then, we have kept on investing significantly to further improve our cost competitiveness in our facilities. Our margins won't be the tool to be used in our pricing conversations. It will be the reality of inflation or cost inflation conditions. Please keep in mind that only 1/3, maximum 40% till now, excluding hedging of the real underlying manufacturing cost inflation suffered in the glass packaging world over the last two years have been yet reflected in our sales prices. There is still a lot of things to do. We are far from fully recovering or fully readapting our sales prices. The reason for this is. Okay. First, this industry is highly competitive, obviously.
This is the main reason why we will focus always on our cost competitiveness to secure the future of this business. Second, because of the mathematical effect, the time delay needed to fully reflect in price adjustment formulas, particular selling conditions on energy inflation. Only because of this, prices are to be increased in 2023 unavoidably.
Okay. Very, very interesting explanation, and thank you for your hard work, all the team. Thank you.
Thank you. The next question comes from Roberto Cassoni from Carlos Capital. Please go ahead.
Hello, hi. Good morning, everyone. Ciao, Raúl. Ciao, Iñigo. Most of my questions have been asked already, but I have one, if you want, structural question. I mean, it's since 12-18 months, the structure of the sector in Europe at least, as much as we knew it, has broken, i.e., you are currently relying on U.K. and Italian governments basically to protect you from volatility in the gas price. While others have kept what was originally also your strategy, which was hedging well in advance into the following years. It looks like now the, you know, the sector in its dynamics is sort of disconnected.
You know, we all connected to Verallia's conference call yesterday. We all understood that those guys are now hedged at the higher price for 2023 and potentially the beginning of 2024, and so they need to increase prices. While you are much more exposed to short-term volatility of the energy price. My question is the following: I mean, if the energy price, for any reason, because the public debt in Italy doesn't allow protecting you anymore, U.K. is possibly in the same boat now, or a cold winter comes and the gas price goes back to EUR 200-EUR 250, how would be your 2023? Would you need to increase prices more than 20% to protect your margins?
How would the other players react, given the fact that they don't have the emergency and the need to do a price increase immediately? Thank you.
Thank you, Roberto. Ciao.
Ciao.
Well, let's say that it is true that a number of market interventions, government market interventions, particularly in the U.K. and Italy, are things that could change. Only seeing what has happened with the U.K. government since they announced these projects. Please keep in mind that all the things that the U.K. government are reverting back is not having an impact on the natural gas price cap mechanism. This is good news for us. Simultaneously, this is still not done, but the European Commission, and this is not only rumors, this is a real principle of intention.
The European Commission will try to execute, to implement an additional cap mechanism over natural gas prices in Central Europe, the famous reference TTF natural gas prices. That's
Yeah.
Also good for us, and that will give us a level of visibility, okay. The question is, what happens if this is not possible, if the governments are forced for any reason, basically for reasons dictated by financial markets, to revert back from this mechanism? What we n-
Mm-hmm.
What we have now is capacity in almost all of our facilities to arbitrate, sorry, between different energy sources. From natural gas
Mm-hmm.
into fuel, into diesel. Our energy supply agreements are quite flexible because we have dedicated-
Mm-hmm.
some time to renegotiate these. In that case, that will act for us as a cap. Having said that, we could be today using diesel in some sites at quite below natural gas equivalent prices.
Yeah, yeah.
on the average of 2022. We don't have a significant amount of financial derivatives, something that, in my opinion, nothing but capture inflation in 2023, just as a-
Mm-hmm.
Mathematical time effect. That won't be our case. We do have a relevant level of protection because of a significantly different energy risk profile. Obviously, the question is how long this protection will last and what could happen in one year from now, okay? And this-
Mm-hmm.
This is where we are taking probably a bigger risk than our competitors, just to be fully transparent on this.
Okay. Thank you very much. Well, just to. I've been reading a bit about the European initiative. It's a bit weaker than what originally thought, and the price cap is basically. Well, it basically goes into a cost for the public finances, when it comes to paying for a difference. Believe me, I mean, I don't know the U.K. as much as Italy, but Italy doesn't have the ability and the freedom to go much higher on its debt as it is today. That's why I was mentioning the price mechanism and the protection from Italy and U.K. as potentially a weak point. But that was, you know, just to.
Anyway, listen, thank you very much, and congratulations for your results. Thank you.
Thank you.
Thank you. The next question comes from Manuel Lorente from Mirabaud. Please go ahead.
Hi. Good morning. My first question is on the U.K.. This massive bounce back on profitability on Q3, it's mainly what you have just stated regarding capacity mechanism, or is there any other lever that is taking place?
Thank you, Manuel. Well, there is still an effect from this cap mechanism, okay? That theoretically is in place from the first of October to the thirty-first of March, okay. The region of profitability in the U.K. is mainly the different path of execution of price increases and the more efficient pricing mechanisms that we have in the U.K., together with the fact also to have in mind that gas prices in the U.K., NBP reference, have increased less than proportionally if we compare to other reference in continental Europe, such as TTF, okay, which is also relevant.
Okay. Then my second question, I mean, context is very difficult. I know that visibility is changing very rapidly, but I'm having some problems to reconcile some of the messages that Raúl has stated. On the one hand, he has stated that a nice way to think on the next quarter should be on some top line stability, right? On the other hand, he has mentioned these 20% price increase for the next quarters following competitors. On the other hand, you have also stated about some stability on demand. Math does not go in the proper direction. I mean, if we have stability on demand and 20% price hikes, how do you see a stable price? Is there something that I'm missing or?
Yeah, Manuel, there are two factors to consider, the price factor and the volume factor, okay? In terms of prices, we do consider that prices will be the main driver of top-line growth during the last quarter of the year, as long as we will further intensify additional price increases, just to be better prepared for 2023, okay? That will only follow our need to recover cost inflation as we have very well discussed before. The main driver for top-line growth in the last quarter of the year will be price increases, okay? In terms of volumes, what we do see is basically a stability, but this is not reflecting organic demand conditions. This is reflecting our tight inventory levels, okay?
We can't grow more on volumes within the last quarter of the year because from a seasonal point of view, the last quarter of the year, let me remind, always the less relevant period of sale of any natural traditional year for us. Secondly, our inventory levels are particularly tight, okay? The combination of this, it gives you real unavoidable growth on top line, but as I said before, basically based on price increases, not on volumes. These volumes stability won't reflect underlying organic demand conditions.
Manuel, just to clarify, probably the misunderstanding was regarding stable or similar top-line growth, okay? Top-line growth to remain similar for the full year in comparison to nine months.
No, I was more referring regarding next year. I mean, indication for Q4 is, I mean, it's already there. Looking for next year, this 20% price hike is on top of the average of the year, on top of fall quarter or?
This is on a mathematical year-over-year comparison, okay? Full year average 2023 compared with the full year average 2022.
If you are putting this price increase and a certain volume deterioration in the context of what you have stated of 20% EBITDA margin as a starting point for next year, on absolute terms, that implies that your EBITDA will be peaking. It will be above 2019 level. That's the correct way of thinking about next year? This is the message that you want to state, that given what visibility you have on prices, on volumes, and the starting point of fourth quarter EBITDA margin, your best guess today is that next year you will be peaking EBITDA in absolute terms?
Yeah. Two mathematical seasonal things for you to consider, Manuel. We do expect these price increases for the full year 2023 in comparison with the full year 2022, but basically we do consider that prices in January 2023 will be pretty similar to prices on December 2022. Okay? That means, that if we're seeing a driver of margins recovery during the last quarter of the year at these prices, that won't be an additional significant driver for further margin recoveries in 2024. Secondly, please do not forget that we are still to see, as we have mentioned in any of your colleague question before, at the beginning of this call, we are still seeing, unfortunately, some level of inflation in 2023.
The combination of all of this, I do think that will give you the result that, well, our margins have a real capacity to further expand or to recover historical levels probably sooner than expected. Hopefully. Hopefully you are right, but please don't think that all the price increases that we are to implement in 2023 will mathematically result in a positive price cost spread. That won't be the case.
Okay. Thank you.
Thank you. The next question comes from Ignacio Romero from Banco Sabadell. Please go ahead.
Yes, hello. Good morning. Thank you for taking my question. I just have one, a quick one, a clarification on the EBITDA margin for the next quarter, Q4. I'm not sure I got the numbers right. You only need EUR 41 million of EBITDA to reach your target of EUR 200 million for the year. That just means a 13% margin on a 20% sales increase in the fourth quarter standalone. You also suggested, if I'm not wrong, that a 20% margin may be achieved in the fourth quarter. I understand that for the full quarter. If that all is correct, it wouldn't then be the EUR 200 million EBITDA target too conservative? Shouldn't it be more EUR 223 million?
I'm not sure I got the numbers right. If you could please clarify that.
Sure. Thank you, Ignacio. Just to clarify, on top line, as you were mentioning, we're expecting solid contribution of pricing for the fourth quarter, okay? Keep in mind that, okay, in terms of volumes, we do not expect significant contribution and this is still demand trends and volume trends for the fourth quarter are still open, okay? Second of all, in terms of EBITDA guidance, we were saying that we expect during the fourth quarter a progressive gradual recovery towards 20%. This means that probably we will be finalizing the year in December at this kind of levels. We'll be probably starting 2023 already at these levels of 20%, but for the full quarter, margins will be slightly below that level, okay? Just as said, the progressive recovery in October, November and December. Okay?
In any case, the guidance is absolute EBITDA above EUR 200 million.
Okay.
The effectiveness of our guidance, Ignacio, well, we are trying our best to avoid missing our guidance again. This is how we are sticking to our guidance at this level.
Thank you. Very clear.
Thank you. Ladies and gentlemen, there are no further questions by telephone. I will return the floor to Mr. Gómez and Mr. Mendieta. Thank you.
Okay. Thank you. There are just we have received just one question through the webcast, and we are asked if we can split top line growth in terms of volumes and price mix for both Q3 standalone and nine months accumulated. Okay? Very easy on that point. Both Q3 and nine months organic growth are fully due to pricing, okay? Volumes are flat in Q3 and flat in nine months. This means that prices for Q3 are something in the range of 25%-26%, and prices in nine months are something in the range of 23%. With that, we have now answered all the questions also received via webcast. Okay, once again, thank you everybody for the time that you have dedicated to us this morning.
Just remind you that, as always, we remain at your complete disposal for any further questions that may arise after the call. Please keep on consuming glass. Thank you very much.
Thank you. Bye.
Ladies and gentlemen, thank you for your participation. You may now disconnect your lines.