Good morning. Welcome to the conference call organized by Vidrala to present its 2026 first half results. Vidrala will be represented in this meeting by Raúl Gómez, CEO, Galo Álvarez, Chief of Sustainability and Corporate Development, Iñigo Mendieta, Corporate Finance Director, and Unai Alvarez, Investor Relations. The presentations and the Q&A session will be held 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 a supporting material to cover this call, as well as a link to access the webcast. Mr. Alvarez, you now have the floor.
Good morning, everyone. Thank you for taking the time to attend today's call. As previously announced, we published our 2026 first half results earlier this morning, together with a presentation that will support this conference call. We encourage you to access the webcast available through our website or alternatively, to have the presentation at hand. With that, I will now hand over to Iñigo.
Thank you, Unai. Before we start, let me briefly introduce Galo Álvarez, our Director of Sustainability and Corporate Development, who is joining this call as part of the evolution of our investor relations function. Welcome, Galo. Please go ahead with your introduction.
Thank you, Iñigo. Let me start with a brief reminder of what Vidrala is today. We're a focused glass packaging multinational, clearly organized around three business units: Europe, U.K. and Ireland, and South America. We operate 12 sites, around 10 billion containers a year we are producing, and serve more than 1,600 customers, including leading global brands and key regional customers. We also combine that with strong sustainability credentials. Recycled glass represents 55% of our raw material mix, and our CO2 intensity is 0.321 tons per ton of melted glass, 25% lower than 2019 and one of the lowest in the industry. Our three strategic pillars are customer, cost, and capital. They reinforce each other. Our goal is to serve global customers and key regional accounts in the most competitive and sustainable way.
Our industrial model and cost discipline allow us to meet their requirements at scale and sustain resilient margins and strong cash conversion. We allocate that cash with discipline, reinvesting through smarter CapEx, designed to lower OpEx while also delivering sustainable shareholder returns. That reinvestment further strengthens our footprint and the value proposition we offer customers. Moving to slide four, let me translate our footprint into how the group is organized. Again, we have three clearly defined business units: Europe, U.K. and Ireland, and South America.
Europe remains around half of the group sales and EBITDA. U.K. and Ireland business represents roughly 1/3 of sales and 1/4 of EBITDA. South America already contributes almost a quarter of group EBITDA. We are now a more diversified group, not a more complex one. Each business unit has a clear accountability, close to customers and markets, all three operate under the same industrial model. With that context, Unai will take you through the first half figures.
Thank you, Galo. Before walking through the key financial figures, it is worth noting that the Chilean acquisition has been consolidated into our results as of 1st of January of 2026. To ensure comparability, we have included breakdowns on a like-for-like basis, incorporating the results generated by the acquired business into 2025 figures. Turning back to the presentation, let's begin with an overview of the main financial figures. For the first half of 2026, Vidrala delivered revenues of EUR 754 million, EBITDA above EUR 225 million, and a net income equivalent to an EPS of EUR 3.36. At the end of June, net debt stood at EUR 252 million, including the Chilean acquisition at an enterprise value of EUR 75 million, which translates into a low leverage ratio of 0.6x over the last 12 months pro forma EBITDA. Let's take a closer look at revenue.
In this chart, we have broken down the year-on-year movement on a comparable perimeter basis, arriving at reported sales of EUR 754 million. This represents an organic change of -3.8% at constant exchange and comparable perimeter. The variation just reflects the expected price adjustments of -1.8% and the ongoing progressive improvement in volume trends. Moving on to EBITDA, we apply the same breakdown to understand the year-on-year evolution. First half 2026 EBITDA amounted to EUR 225.5 million, showing a positive performance at constant currency and like-for-like scope. This highlights the benefits of diversification while ongoing cost focus actions continue to strengthen our competitiveness. This operational performance translated into a solid EBITDA margin of 29.9%, reflecting an expansion of 110 basis points compared to the same period last year, underlining the resilience of our business model amid challenging market conditions and ongoing inflationary pressures.
Volume performance continued to improve sequentially, with volumes progressively recovering and turning into positive in Europe during the second quarter. This sustained momentum reflects the strength of our commercial strategy and our ability to adapt swiftly to evolving market conditions. At the same time, EBITDA growth accelerated, with margins remaining resilient despite ongoing macro headwinds, underpinned by operational excellence and continuous focus on cost discipline. We now turn to sales and EBITDA by business unit, Europe, U.K. and Ireland, and South America, which includes operations in both Brazil and Chile.
Performance was driven by the recovery in Europe and sustained momentum in South America, where margins evolved in line with expectations, underpinned by the execution of our competitive actions, our ambitious investment program, and the complementarity of our industrial footprint. Now, I will hand over to Iñigo, who will provide more detailed insights on our balance sheet position and shareholder remuneration.
Thanks, Unai. Let's look at the evolution of financial position. At the end of the period, net debt stood at EUR 252 million, equivalent to a net debt to EBITDA ratio of 0.6x . This reflects the strength of our cash generation capabilities and our disciplined approach to capital allocation, while at the same time supporting several strategic initiatives undertaking during the period. In particular, this net debt figure incorporates, as already mentioned, the acquisition of Vidrala Chile, completed at an enterprise value of EUR 75 million, and in addition, it reflects the interim dividend paid in February, the execution of our ambitious investment plan, and the ongoing share buyback program. Despite these significant cash outflows, our balance sheet remains solid and continues to provide substantial financial flexibility. Finally, turning to shareholder remuneration. This chart highlights the consistency of our distribution policy.
Vidrala has increased its dividend every year, extending this track record through 2026. This year, we are making an extraordinary effort to enhance shareholder returns. For 2026, the dividend has been increased by 15%, bringing total dividend payments to more than EUR 62 million. In addition, we have expanded our share buyback program. Initially launched to repurchase shares equivalent to 1% of the share capital, the program has subsequently been extended twice by an additional 1% on each occasion. As a result, we will repurchase up to 3% of share capital, equivalent to a maximum amount of EUR 90 million. Taken together, dividends and share buybacks will represent more than EUR 150 million returned to shareholders this year, underlining the strength of our financial position, our confidence in the long-term prospects of the business, and our continued commitment to deliver attractive and sustainable returns to shareholders.
Thank you, Iñigo. Let me now turn to the outlook for the full year. The first half performance was consistent with our expectations, and we therefore reiterate the guidance announced in April. First, EBITDA about EUR 450 million, consolidating operating profits and margins despite challenging macro conditions and intense competition. Second, EPS growth above 5%, supported by strong operational performance, a contribution from our broader geographic footprint, and the ongoing share buyback program. Third, underlying free cash flow of around EUR 200 million, excluding restructuring costs, while continuing to execute our strategic investment program. Raúl, over to you for the closing remarks.
Thank you, Galo. Thank you, Iñigo. Thank you, Unai, not Unai. Thank you all for your time in attending today's call. We know that it's a busy day for all of you. We really appreciate your time. Well, our first half of 2026 reflects much more than solid financial performance. It demonstrates the resilience of a business built on disciplined industrial execution, operational excellence, and a clear strategic geographical vision. Vidrala delivered earnings growth despite quite a challenging, complex environment. That was supported by our ambitious industrial investment program, the contribution of our new expanded South American business platform and our different operational initiatives to further enhance our cost efficiency. Finally, the continuing strengths of our customer value proposition. The combination of these factors position us well to deliver on our this year performance expectations, as Galo reiterated before.
Beyond this number and beyond this year, we remain focused on the future and firmly committed to our three strategic pillars: customer, cost, and capital. We will invest, and we will deploy our industrial model, maintaining a strict financial discipline, and we will allocate capital selectively and strategically. This is part of our DNA. We will remain focused on cost and competitiveness. So, as a result of this, we will make our best to attract customers, make our products, and serve our markets in the most efficient, competitive, and sustainable way possible, returning value to our shareholders progressively. At the end, we are proud of what we are building. The future belongs to us. Glass is a unique packaging material, and consumers will prefer glass everywhere in the future.
Thank you, Raúl. This concludes our exposition. We will now move on 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 dial star five on your your telephone keypad. Our first question comes from Iñigo Egusquiza Castellanos from Kepler Cheuvreux. Your line is now open. Please go ahead.
Good morning, Raúl and team. Thanks for taking my questions. I have two questions, if I may. The first one would be if you can elaborate a bit, the better net volumes that we have seen in Q2 versus Q1, especially the recovery that we have seen in South of Europe, which has been positive in Q2. How is the trend, for the summer, for July, as we are almost ending the month of July? What are your expectations for the summer season? This is the first question.
The second question would be more on 2027. You are reiterating the guidance for 2026, but my question would be more on 2027, pricing strategy or what can we expect after three years of price moderation in the industry with a pickup in natural gas pricing. Again, what can we expect for pricing still soon? Any thoughts would be much appreciated. Thank you.
Thank you, Iñigo. This is Raúl. I will take these points. First, regarding the trends that we are seeing in our sales volumes, I think that the trends that we have seen in the second quarter give us the credentials or the confidence to reaffirm our initial expectations. You remember our message, three months ago, the time of our first quarter results publication, that give us the confidence for the remainder of the year. This is basically the result of a broadly flat demand context in Europe, including the U.K. We are seeing some growth in South America. This is very evident since the beginning of the year. We are combining this, let's say, organic demand context with some efforts to recover market share. This give us the confidence to reaffirm our expectations for the remainder of the year.
To also answer what is happening today in terms of seasonality that we are seeing, okay, let us broadly repeat that it's summer in Europe, but winter in South America. It's a peak season in Europe, low season in South America. The peak season in Europe is performing as expected, not significantly worse or better. The peak season in South America performed at the beginning of the year better than expected, and we hope this to maintain for the rest of the year. Okay. Sales volume is not giving us any sense of surprise. Regarding prices. Well, first, we should say that we are seeing persistent inflationary pressures, mostly due to the energy factor. Something that is particularly evident today following the events that we are seeing in the Middle East and the war in Iran.
Okay. Despite we are widely protected in our energy exposure, we will see a number of collateral inflationary effects. We will need to adapt our prices consistently as much as possible, depending on the competitive landscape. The message will be clear from our side. Even after the selective efforts that we will make to recover some businesses with customers, some market share, we do not foresee any risk of a negative pricing movement for the remainder of the year, even in 2027. More than this, we don't foresee any risk of margin deterioration due to any potential negative spread between prices and cost in 2027. We will do what we need to do.
Okay. Our next question comes from Natasha Brilliant from UBS. Your line is now open. Please go ahead.
Thank you. Good morning, thank you for taking my questions. My first question is just on the South American business. You showed the pie chart now that South America is now almost 20% of revenues. Is that the right mix, or do you see further scope for acquisitions in the region? Can you talk a bit about the pipeline and your thoughts there? Then my second question is just looking at working capital. I think it's ticked up quite a lot versus last year from what I can see. Could you just remind us of the dynamics, and anything that we should bear in mind there, please? Thank you.
Thank you, Natasha. I will take the second question regarding working capital and its impact in our free cash flow generation. Free cash flow for the first half has been almost EUR 30 million, an evolution fully in line with our expectations for a full year. As already anticipated, this figure reflects the seasonality of working capital, where stock levels are pretty much under control and where movements are also under control. The main explanation comes from CapEx seasonality, where execution during the first half of the year has been more intense, as already expected. Therefore, we are expecting robust free cash flow generation in the second half of 2026. Yes, underscoring our differential free cash flow profile, we reach approximately EUR 200 million of free cash flow as announced in full-year guidance and today, reiterated.
I will take the first question, Natasha, regarding South America. You let me remind that we entered South America basically some days ago, okay? Two years ago. We are at the beginning of building the platform for future growth that we foresee. Things are going well so far. South America is a wide region. Even Brazil is a continental country. I'm sure that you will probably agree with me that we will unavoidably see a number of potential interesting opportunities. Okay? We will explore. You can be sure that we will explore any of them. But for the time being today, what we are doing is trying to consolidate our new business in Chile, trying to consolidate our very solid business in Brazil, trying to analyze any potential opportunities to expand capacities and attract new customers in our existing perimeter. It's time to keep calm for a while.
Perfect. That's very clear. Thank you. If I could just ask one final one, if we could get the usual breakdown of volume and pricing by region for Q2, please.
Sure, Natasha. Let me provide first volumes and then pricing. Okay? For the first six months of the year at group levels-
Q2.
...Q2. Sorry. Sorry, Natasha. Going ahead to Q2.
H1, whatever's easier.
Okay, I give you Q2. Volume trends in Q2 at the group level has been slightly negative by -0.6%. Going to a breakdown by business unit, volumes in Europe have been positive, as already anticipated, by 1.5%. Volumes in U.K. and Ireland have been negative, improving from Q1 by -7%. Volumes in South America continue performing well, growing by 4%. Okay? If we go to pricing at the group level evolved as expected, down by -1.7%. Going to the breakdown by region, in Southern Europe, pricing was down by -4.3%. In the U.K. and Ireland business was slightly negative also, by -0.4%. In South America, we continue to see some inflation, prices going up by 3.5%.
That is perfect. Thank you very much. That's very helpful.
Ladies and gentlemen, please be reminded that if you'd like to ask a question, you should dial star five on your telephone keypad. Our next question comes from Luis de Toledo Heras from Oddo. Your line is now open. Please go ahead.
Yeah. Good morning. Thanks for taking my question. Just one regarding the U.K. and Ireland market and the import trends. Obviously, you have provided the figure about volumes, but prices seem to be resilient. I don't know if you have any reading on the import pressure and the cost reduction. If you could also elaborate a little bit on the restructuring measures. You provided in the last conference call the potential savings. I don't know if you have provided any approximation to restructuring costs. Thanks.
Thank you, Luis. Well, it's true that we lost a number of businesses or volumes with customers in the U.K. some months ago, probably a year ago, due to what I should consider abnormal levels of competition, mostly from, but not only from imports. Thus, we are getting adapted. We are under a strict process of restructuring, process of cost reduction, and the result of this is becoming evident in our margins. Okay? This is progressing well. There is still some work to do. Let me insist that our margins are proving that we are doing the right thing and we are going in the right direction to make our future belongs to us. We will progressively see some recoveries on the volumes that were lost. Okay?
This should become progressively evident during the next half of this year, through the remainder of this year, and probably more in the next year, in 2027. Meanwhile, let me insist, profits and margins, profit levels even in value and margins relative to sales are broadly safe in the U.K. That makes me think that the U.K. and Ireland is a core business for us, really core business for us.
Thank you very much.
Our next question comes from Fraser Donlon from Berenberg. Your line is now open. Please go ahead.
Hello? Can you hear me?
Yes, it's you, Manuel. We can hear you. Manuel?
My apologies. The next question comes from Manuel Lorente from Santander. Sorry.
I have three questions, if I may. The first one is for Raúl. You mentioned some specific market share gains throughout the entire year in order to offset somehow this muted volumes backdrop. Raúl, do you have the perception that you are gaining market share from key large competitors or smaller competitors?
Thank you, Manuel. Let me say that the perception I have is not a perception, it's a conviction that I can't share with you now in this conference call, okay? What we are doing is something that you will prove, seeing the numbers of some of our competitors. It's something that we are doing intentionally with a real financial discipline, and, okay, we are just progressively and modestly recovering what belongs to us.
Okay. My second question is on U.K. You also mentioned that we should see some progression in terms of volumes throughout the second half of the year. Do you have the perception or the conviction that this improvement progression in volume, it's mainly because of easier comps as you have a more benign comparable basis as part of the clients you lost on last year, or is, let's say, new clients?
This question is a key topic for us today. Okay. It will take some time for us to recover the volumes that we lost in the past two years, okay. No more than 18 months, but this won't be fully captured this year. Okay. For now in the future, we will see a progressive better trend in sales volumes in the U.K. And why? Because our costs are getting adapted, because we are being able to get our prices adapted as well, and we are seeing that the level of competition is less intense than it was in the past, mostly due to the renewed inflationary pressures that some of our competitors, particularly importers in the U.K., are suffering. That give us the confidence that our sales volumes will recover in the U.K.
Organically, demand is still somewhat negative, probably performing slightly, but only slightly or modestly worse than in continental Europe. That won't be an excuse. Probably organic demand will end this year on a flattish point. Okay. And we're not foreseeing demand recovery significantly in 2027, if that happens, that will be nothing but positive for us. We are not betting or depending on any still unexpected organic demand recovery.
Okay, great. My last question, it's on M&A. There is an intense restructuring from several of your competitors. Your strategic fit in the last year has been out of Europe into LatAm. Due to the fact of the mounting opportunities that are arising in Europe, do you keep this mantra of LatAm versus Europe? Is it still valid, or you might see some tactical opportunities here and there in Europe?
Well, first of all, thank you, Manuel. First of all, let me remind that we are fully aware of the fact that the world is dynamic, the world entirely, not only the glass container industry. We are forced to remain dynamic as well. It's evident that our financial position should give us some advantages. In terms of M&A, the message remains the same for us. We will actively analyze, explore, and in some cases, build the opportunities that we consider interesting. Today, we are fully focused on our current perimeter. We cover sales volumes. We need to maintain our margins under control. We will invest, and we will keep our priority on cost competitiveness. We are always somewhat involved on potential opportunities. Today is not an exception, but I will repeat the same message. Whatever happens in the future, you can be sure you won't be surprised.
Okay. Thank you, guys.
Our next question does now come from Fraser Donlon from Berenberg. Your line is now open. Please go ahead.
Morning. Can you hear me?
Yes, we can hear you, Fraser.
Perfect. I just wanted to ask about Chile. Could you maybe give an update on how the business performed specifically in Q2? Also, I know you had some ideas to increase a lot the kind of internal efficiency of that division. Any update you could give on the progress there since you acquired the asset. Thank you very much.
Thank you, Fraser. Well, you know that Chile is a significant step for us because we are entering a new country and a new business, but it's financially less relevant. Let me say that since the beginning, we are trying to make and deploy our industrial model in Chile, and we will see some benefits on our cost competitiveness there. There is a lot of competition in Chile. This is not surprising us. It's probably surprising for people from out of Chile, but this is the reality in Chile today, and we are battling under this reality with delivering better margins, better profits, and better sales. That makes me think that we are performing well in this very preliminary first stage of our strategic cycle in Chile. Everything is going well so far, but this is just the beginning.
Thank you.
The next question comes from Ashish Ketan from Citi. Please go ahead.
Hello, everyone. Thanks for giving me an opportunity. I just wanted to check on capital allocation plan with respect to medium term. Currently, your net leverage remains very low. How are you thinking about the balance between M&A, dividends, buyback going into 2027? Are we going to see more buybacks, or we see more M&As? Thank you.
Well, thank you very much. It will be probably a combination of both. Okay. Let me say first that our solid financial position, our low levels of debt is not a target in itself. It's the result of the target. The target is to generate our ambitious level of sustained free cash flow. As long as we are delivering well in this target, our debt levels are solid. We are reducing debt, and this will nothing but put, I agree with you, an additional and accepted and positive level of pressure to return cash to our shareholders. We promise that we will deliver well on this. This year is not an exception.
If you remind the Iñigo's explanations during the preliminary speech or the preliminary introduction, we are making an effort this year combining cash dividends with share buyback programs, and this is an example of what we will do in the future. We will try to increase cash dividends if the business performs as expected. We will try to increase cash dividends with purpose in mind because we want to maintain a sustained level of dividend growth, and we will combine cash dividends with other tools, really like share buybacks, as long as we have capital to allocate or to return to our shareholders. Thank you.
Thank you. Thank you, Raúl.
Our last question comes from Iñigo Egusquiza Castellanos from Kepler Cheuvreux. Please go ahead.
Thank you for taking my two additional questions, if I may. The first one would be on the guidance that you reiterate today, Raúl, with this EBITDA of more than EUR 450 million. The question is, if I am right, consensus has something in the region of EUR 450 million-EUR 451 million EBITDA for 2026. I don't know how do you see this number, because making the numbers after the strong first semester, this EUR 450 million annual EBITDA implies that H2 EBITDA would be lower than H2 2025. I don't know. How do you see this consensus number? It seems a bit conservative for me. This is the first question, the second question would be more on a mid-term perspective on the free cash flow that you mentioned, this EUR 200 million.
The CapEx the last few years and this year is being slightly higher, EUR 170 million-EUR 180 million, compared to the normalized CapEx. My question is, when can we expect the CapEx to be more normalized level and to see a stronger free cash flow if we normalize this CapEx to, I don't know, to a more normalized level of around 10% over sales? Thank you.
Well, thank you, Iñigo. Starting by your second question, it is true, and we accept the message that our level of CapEx is abnormally high. This is purely intentional. We are investing more than pure replacement, and we are doing this for a reason, and this reason is progressively becoming real in our cost competitiveness, and this is having a result in our margins resilience. We accept in Vidrala that we do have a challenge to deliver results after this level of abnormal CapEx. CapEx will get normalized soon in the future, but not yet in 2027. This won't distort our levels of free cash flow. That means that free cash flow should even grow in the future, even after this abnormal high level of strategic and intentional high level of CapEx if we are able to grow on operating profits. The first question regarding our guidance.
It's true that, and I agree with you, and this message doesn't surprise us, that our second quarter results probably will give us more confidence, credentials to make our full year guidance on EBITDA real possible. It's also true that mathematically it'll look to you that the second half is probably excessively conservative. Let me remind that this is still too soon, and the business is still full of complexities. Take a look at what is happening with energy cost in Europe. You can see that there is still an excessive level of competition, something that we have suffered a lot, and we are still trying to deploy some restructuring action plans, particularly in the U.K. and Chile. We will maintain the same approach so far, and I will invite you to consider that, okay, this year guidance is realistic and to keep an eye on the next year.
Thank you. Very clear. [Non-English content] Raúl.
There are no further questions by telephone. I now hand it back to the Vidrala team who will address questions submitted via webcast.
Thank you. There is only one question through the webcast. It's a couple of one, but it's the same question, which is regarding our energy hedging for 2026 and 2027. Maybe, Galo, you can take this one.
Thank you, Iñigo. I would say that, before turning into our energy exposure, it is worth recalling that one of the most effective tools we have to protect ourselves against energy prices are price adjustment formulas. These formulas are mostly secured through long-term contracts with customers, and this allows us to pass through cost inflation. In addition to energy paths or price adjustment formulas, we have a hedging policy with a mix of derivatives and options, as you are all very much aware.
South America is different in this case because energy prices are less volatile and mostly covered through adjustment formulas with customers. As a result, approximately 70% of the energy exposure for 2026 and 60% of 2027 is hedged through derivative instruments. This means that almost all of our energy exposure in Europe, including the U.K., is fixed for the remainder of the year, and a larger part for 2027, both at reasonably competitive levels.
Thank you. Before ending this call, I would like to take a moment to share a personal note. As some of you may already know, after almost 10 years with the company, Iñigo will be leaving his role as Corporate Finance Director to pursue voluntary future career opportunities. I would like to thank him for his contribution over these years and wish him all the best in his next chapter. At the same time, we are evolving our investor relation function, which will now be integrated within the corporate development area led by Galo. This will allow us to continue strengthening our engagement with investors with the help of Unai and ensuring consistent communication of our strategic priorities. Iñigo, we will miss you a lot. Investors and analysts, you will be treated with transparency, implication, and dedication as always. Thank you.
With that, we have answered all the questions sent through the webcast and by telephone. You have more questions or need more details, please feel free to contact us anytime. That's all for today. Thank you very much for joining us