Hello, and welcome to the Verallia Q1 2023 Financial Results Analyst Call. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only. However, you have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Patrice Lucas, the Director General, to begin today's conference. Thank you.
Good morning, everyone, and welcome to our Q1 results call. As always, it is a privileged moment for Nathalie and myself to have this call with you to present our results and to answer to your different questions. To start with our ID card that has been updated obviously with the last news. You see that now we have 63 furnaces worldwide. An additional one coming from Jacutinga and plus the 4th coming from the Allied acquisition named now Verallia UK. It means that 34 glass plants, we are seen as number one in Europe, number two in Latin America, and number 3 worldwide. Do propose to share with you few highlights before going to our financial numbers.
We keep on moving on our journey and application of our ESG roadmap. Here you have two key examples of some achievements. We communicated already that solar panels was one of the solution for us to keep on moving forward. After Mondego plant in Portugal last summer, here in April, we are going to have in Gazzo, in Italy, a new installation with solar panels. This installation having a capacity of 4.7 gigawatts will supply up to 5% of the plant consumption. Per our plan, this deployment is going on in all the factories of the group.
Again, this is one of the solutions we are implementing to keep on decarbonizing our company. Second, second topic, we commented that in Pescia, you know that we are launching a new furnace next year in 2024. That we have chosen the oxycombustion technology to reduce our CO2 emission. Globally, compared to a traditional furnace, it means that emissions will be reduced by 18%. This technology is requiring an oxygen production facility on our site, and we have selected Air Liquide, a well-known worldwide leader in this technology for this project. Meaning that we are going to partner with Air Liquide to get this oxygen and to contribute again to the implementation of this oxycombustion technology.
Next topic, you remember that last year we had a reuse lab in France with the objective to gather the overall ecosystem to understand and move forward on this topic, which is one of the solution which we will offer to the market, to our customers. This year, we did the same with Italy, holding up this workshop. It was an event organized in March 16th. The event was with more than 85 attendees, 30 customers, 12 speakers, several workshops, roundtables. Again, here, objective is really to exchange, to understand the overall ecosystem and to see how we could implement and propose solutions to customers.
Next step here, as a conclusion of this reuse lab in Italy, is to develop a pilot project in 2024, which will be a first experience in Italy, and obviously to test the market and to be in the test and learn situation. Again, we are moving forward with our ESG roadmap implementation. Next, highlight, just want to share with you that we have restarted our second furnace in Ukraine. You remember that, with the current situation in Ukraine last year, just after the war, we stopped our two furnaces. After a few weeks, we restarted one furnace. We take the benefit of the stop of the second furnace to make some partially repair.
Since April 7th, the conditions being met to restart, we have decided to relaunch this furnace. It has been a great activity, a great teamwork. First be able to make this partial repair, given the condition, the local condition in Ukraine. Now we can say that we are going to enjoy this additional capacity. First, mainly dedicated to supporting the local market, then having some opportunities for export as well, seen as an opportunity. Want to congratulate the Ukrainian team for what they have done and all the support which has been provided to the group to have such good news to present to you. Few words about Verallia UK integration.
We can say that we are on track, very satisfied with how we are moving forward. This integration has started day one. Since January first, we name it Verallia UK, it is totally now part of a group. Obviously, many integration projects are going on. Since day one, we have included all the procurement topics in the purchasing contract and policy of the group, we are getting some nice first purchasing synergy. For instance, an obvious one, which has an impact on synergy, is what we have been able to do with soda ash contract, including them in our contracts and purchasing power. On the industrial side, very good integration moving forward as well.
What is key for us is how we are going to be involved in the PAP methodology. Right now, the PAP, you know, this is everything which is related with our efficiency on the shop floor, with the production cost reduction we are looking for, with a clear objective at group level to get 2% minimum per year. Here we are in the training education of the methodology, we should start to see some first actions to be launched in H2, to be at full speed in 2024. In a nutshell, very satisfied with how we are moving forward, how the teams are integrating the groups with a positive mindset and Everything is on track.
Finally, before to go in the details, with Nathalie with the numbers, with our financial numbers. We can say that we have a very good start of a year. Revenue + 40%, to more than EUR 1 billion, representing a + 34.7% organic growth. On the Adjusted EBITDA, more than EUR 300 million, + 68% compared to Q1 2022, with a margin, a EBITDA margin of 29.2%, compared to 24.4% last year. On the net debt, we continue to de-leverage the company, closing Q1 at 1.3 times Adjusted EBITDA compared to 1.6 times at the end of December. I give the floor for... To, to Nathalie.
Thank you, Patrice. Good morning to all of you. Very pleased to present to you these good numbers for the first quarter of 2023. You see here the bridge for our consolidated revenue from EUR 750 million in Q1 2022, up to EUR 1,052 million in Q1 2023. The organic growth has reached 34.7%. A strong organic growth, fueled, as you can see here, mainly by price and mix. I'll come back to that. The volume pillar here is slightly negative at minus EUR 39.2 million. We have seen volumes lower than last year.
Just let's remember than that Q1 last year had enjoyed a strong growth in volumes, +9% versus prior year. In the quarter 2023, in the first quarter, we've seen some specific events like unfortunately, France being penalized by a national strike. We've seen a soft start in beer across Europe, and especially in Germany. In LATAM, we've seen growing volumes in Brazil, and which is good. Let's remind that we started a new furnace in Brazil, so fully loaded. In Argentina and Chile, lower volumes than expected, where we see inflation and local political situation impacting the consumption and the exports for both countries.
For the price and mix, so you can see that a very strong contribution to this quarter. Here again, comparison basis, especially for prices. If you remember, in 2022, we rolled out several waves of price increases, and in Q1, we're just starting. And so we have the carryover impact of last year's selling price increases. Plus we have been using price increase linked to the rise in production cost, the cost 2023 versus 2022. And the mix, it's important to say, is still positively contributing to both top line and EBITDA. The FX pillar is negative, and this is mainly due to Argentinian peso. And the perimeter effect that you see here for EUR 63.1 million is the turnover of Allied Glass. The...
I mean, now Verallia UK. The acquisition was done in November 2022, so we'll have this perimeter effect until end of the year. This new business is mainly contributing to spirits, so it's boosting our sales in spirits. Basically, the top line is enjoying strong organic growth and the contribution of this newly acquired UK business. Now, if we look at the Adjusted EBITDA, so you can see on the top right that our Adjusted EBITDA margin improved, moving from 24.4% into one last year to 29.2%. You have the bridge on the left, with the usual pillars.
If we start with activity, you see -EUR 16.6 million, slightly negative. This is directly linked to the volumes I commented. Again, here comparison. In fact, if you look at last year's Q1 bridge, you will see a positive activity and a negative spread. We are here in the exact opposite. We had again, a strong Q1 2022 in activity. For the price mix cost spread, you see it's very positive. Again, a comparison versus last year. Positive mix contribution going on, which is very, very positive. The net productivity brings EUR 12.8 million to the EBITDA of the quarter.
Very satisfactory to see that we reached the target to reduce cash production costs by 2%. This despite a specific situation, for example, the France strikes impacting the plants. A good performance for net productivity in the quarter. You know this is an important pillar. Foreign exchange is adverse and mainly due to Argentina. The other pillar is positive with EUR 6.8 million. Here it includes a specific one-off around EUR 10 million that is linked to the fire we had in Argentina in 2021. In fact, it's the end of the insurance reimbursement. Took some time to close this file.
It's, it's really a one-off that is impacting the EBITDA and the margin as well by around 1 point. We have here also included the contribution for UK business that is still impacted in the quarter by some RSRS booking, but otherwise it's fully in line with expectations in terms of profitability. We have some other negative one-offs as well. This leads to an Adjusted EBITDA of EUR 307 million that is showing a significant increase versus prior year. Looking at cash, the group net debt evolution that you can see here. The net debt is EUR 1,304.4 million. This is a leverage of 1.3 times.
We continue to deleverage the group, as you can see since December, where leverage was 1.6 times, and it was 1.7 in March, 1 year ago, end of March. Pleased to say that to remind that Moody's has upgraded Verallia credit rating from Ba1 to Baa3. The group is now Investment Grade with Moody's with a stable outlook. That is a sign of the strong credit metrics, of course, of the group. And very nice to see that. Now, as usual, you can see here the financial structure and the liquidity. The available liquidity is comfortable at EUR 837.7 million.
The structure, the financial structure shows structure, is, I mean, there's nothing specific at the end of March. If we move to the next page, I'm pleased to announce that we successfully refinanced the term loan and the RCF that we had for EUR 500 million each. You have here, in fact the maturity profile now of our debt. We enjoyed material oversubscription for this refinancing. We've pushed the maturities to 2027 with options to push to 2028. You have here most of the details. We also took the opportunity of the oversubscription to increase the facilities from EUR 1 billion to EUR 1.1 billion.
That is reinforcing our liquidity. This term loan in our RCF are also Sustainability-Linked. Now we have linked them with KPIs, 3 KPIs related to CO2 emissions, but also water consumption. That is an increasing matter that we're working on as well, and the proportion of women managers to have a social component. The pool is broad and with international banks, and all the documentation is upgraded to Investment Grade style.
Thanks, Nathalie. Based on this Q1 start of the year, we have reinforced our guidance for the full year. Revenue, we still see the revenue above 20% compared to last year. Adjusted EBITDA, which will be more than EUR 1 billion, and with the market which is supportive to do so. Thanks for your attention. I propose now that we open the Q&A session.
Thank you very much. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our first question from Mathias at Deutsche Bank. Your line is open. Please go ahead.
Yes. Good morning, ladies and gents. First of all, big congrats to the outstanding results. Very well done. My question would be firstly on volumes. How do you think about the rest of the year with a bit of weakness in Europe, still some growth in LatAm, but also kind of a potential to get new volumes from the second furnace in Ukraine and from the restarted furnace in UK. Would flat volumes be too ambitious for this year?
Thanks a lot, Mathias, for your question, and thanks for your congrats. Volume and market going forward, obviously is a golden question. What I can say today based on the data we have and obviously being very vigilant and attentive to all the weak signals of the market, we see a volume for the full year with a slight growth. We believe that we could benefit from a positive impact moving forward. First of all, in France, we all hope that this national social tension coming from the pension new with new scheme is going to end. This will be we could benefit from that.
Italy, with the repair furnace, restarting in production in the weeks to come, should be a positive, should have a positive impact. Ukraine furnace is an opportunity as well, as you have mentioned. Obviously the full impact of Jacutinga, getting at full speed, for the rest of the year. We see a slight growth. We are betting on the fact as well that some specific situation like the beer market, could recover, again, being very, very vigilant. This is what we see today, slight volume increase, full year compared to last year.
Yeah. Cool. Thanks a lot. The second one would be on pricing. Now, obviously new hikes implemented, but the spillover will obviously get smaller, the more we progress because you've obviously started to raise prices much more substantially from the second quarter last year. How do we think about pricing? I mean, what's your thinking? More hikes, or are you done? I mean, the spread is huge. The spread is bigger than last year. Are you also prepared to give something back of that on a positive price cost? How would the pricing trajectory look like for the rest of the year? Thanks.
Yes, Mathias, you're right when you're speaking about spread and Q1 spread.
Is benefiting obviously from the basis of last year and all the carryover of pricing policy which was implementing during the full 22 year. You're right, you're right to say so. About pricing, first, what we need to say is that we have, we still have inflation in 23 compared to 22.
Yeah.
This is a given. You know our policy, which is based on full year spread being positive. It means that we will be rigorous on executing according to this clear objective. We have done some price increase the beginning of the year according to the inflation we estimated for the year, 23. Being fair with our customers and being fair with our, again, policy of this spread being positive, obviously, we could have to adapt and make some price adjustment. Again, with a clear commitment objective to be spread positive full year basis. This is a topic which is going to be implemented, yeah.
Just a small add-on. Is France your biggest concern at this stage with the strikes, but also with gas storage at 30% that you've read, is that probably fair to say?
France, socially is a concern with what is happening nationwide, obviously. To be clear, this is an upside to come compared to what we have done in Q1 with many distribution in production. I see that as an upside. On gas shortage, we will see. You remember that we have this ability to switch back in case of any shortage, and we tested that. I'm quite. I mean, I'm not so concerned about that. I'm not so concerned about being in a kind of shortage situation in the second year. We will make and implement our business continuity plan and showing agility as we did at the end of last year.
Great. Thanks a lot, and congrats again.
Thanks so much, Mathias
Thank you. We'll move on to our next question from Francisco Ruiz at BNP Paribas. Your line is open. Please go ahead.
Hello. Good morning, congratulations for the numbers. Well, I have some follow-up questions on Matthias. The first one is could you give us an idea of how much the prices has increased in Q1? Not the carryover, also just the price increases. I have another question on the breakdown of orders in the EBITDA. Maybe you said that you include the perimeter, which we assume that UK margins are similar, as you said, to the company. That should add something like around EUR 14 million plus the EUR 10 million positive impact of the fire. That means that the one-off are EUR 50 million. Could you detail what these EUR 50 million are coming from?
You could give us an idea of the evolution of working capital and CapEx in this quarter, as also the cost of the new debt. Thank you.
Thanks. Thanks, Francisco Ruiz. So on Q1 pricing, I'm going to be straightforward. I do not want to comment any price increase. Obviously Q1 is benefiting from the pricing we did last year, plus an additional price increase we did according to the inflation of our cost base. As I said, we have inflation again in 2023 compared to 2022. This inflation is lower than what we expected when we built our assumptions, but we have inflation in 2023 compared to 2022. Again, keep in mind that what we are working on is to get this spread positive being full year. Positive spread full year, this is our goal. Again, our objective is to be fair with our customers.
If cost is going down, we adjust price accordingly, maintaining this positive spread. This is the name of the game here. For the others, Nathalie?
Yes, I will take over. Hello, Francisco Ruiz. For the others in the contribution first of the UK business, the profitability is fully in line with expectations. We still have significant impact, negative impact in fact, in Q1 for the UK contribution that are fully linked to the IFRS 3 norm. You know, that you have to revalue all of the opening balance sheet at basically market value. It means that all the inventories were revalued as well almost at selling price. You don't benefit from the margin on the inventory that you are taking over and that we took over end of the year.
In Q1, the impact of this IFRS 3 was around EUR 5 million negative, so it's significant. It's over, so it means starting Q2, we will have the true, I would say profitability, or we enjoy the contribution of the full profitability. That's one. Yes, we have some negatives as well in the bridge. First with comparison with positives that we had last year, and also some provisions.
You know we have 12 countries, so we have several topics, some, you know, provisions on, that full depth, for example, on, or on some risks, that are then, obviously part of the positive impact that I proceed, so the insurance premium reimbursement in Argentina and UK contribution.
Okay. Yes. Just a follow-up on Patrice. I'm sorry. You commented that your inflation has been below expectation. It's just only for energy, or there are other items in the P&L that have surprised positively?
Sorry, say that again, Francisco.
That you commented that the inflation in Q1 has been below your expectations or your initial expectations. It is just because energy, only because energy or there are other items that has been below your expectation as well?
Well, energy is a big part of it, compared to the assumptions we did at the end of last year. With a lot of uncertainties, moving forward, especially on the spot price, you know. We have on the other side, we have some, I would say not bad news, but we are facing some higher inflation, if I'm speaking about raw material. Raw material is still increasing. If I want to mention one example is cullet. Cullet supply is showing inflation in some countries. Energy, right, energy is one of the big, big part of it. On the opposite we have some higher inflation and especially on raw material.
Okay. Thank you very much.
Thank you. We'll now move on to our next question.
Yeah, I think there were, there was still a question for for about CapEx, right?
Working capital.
Yes. On, on CapEx, what can I say? We are on track with our CapEx roadmap. I mean, nothing specific to mention in Q1 in that respect. We are still in what we told you. Around 10% of sales for the full year. You know, the main projects that we have for the year, so nothing really specific to mention here. Your last question, sorry, was on the new... Can you repeat your last question, Francisco?
Hello?
Francisco, you might want to unmute your audio. Yes, go ahead.
Yeah. Yeah. Yeah. I mean, my last question was on the cost of the new financing on the new debt.
Yeah. On the new financing, we'll release this more information when we have fully finalized, because we just signed on Monday. Basically, the agreement has been signed. The closing is for end of this week. All in all, we are very close to the conditions that we had on the previous term loan and the current term loan and RCF. There will be not so much... Which were very interesting, you should remember they were negotiated at the ideal time.
Okay. Okay. Thank you.
Thank you.
Thank you very much. We'll now move on to our next question from Jean-Francois Granjon at ODDO BHF. Your line is open. Please go ahead.
Yes, thank you. Jean-François Granjon speaking from ODDO BHF. The first question concerns the spread expected. Do you expect a positive spread for the Q2 and for the full year? Do you expect a spread higher than you have reached during the first quarter, so higher than 135 million EUR? My second question concern the mix impact. Could you give us more color about the mix impact during the first quarter? My last question concern the U.K. contributions. I want to understand what you explained for the Q1 with a negative impact from the F for the.
Yes, the IFRS 3. Do you confirm the full contribution expected at an average EUR 550 million for the EBITDA for the full year? Thank you.
Thank you, Jean-François. Back on the spread. Obviously the Q1 spread is benefiting from the comparison of Q1 last year. You remember that Q1 last year we were negative, the spread was negative. If you remember, during 2022 year, we moved from negative spread to positive spread at the end of the year and crossing the positive line, I would say, and in Q3. As I've mentioned already, 2023 is gonna be a profile which is totally the opposite. You can understand why when you are making the comparison between quarter by quarter compared to last year. The profile of the spread is going to decrease over time during the full year period.
We are working to make it positive full year at the end of the year. This is what we are working on. Managing closely and wisely our cost base inflation on one side and the pricing policy on the other side. In a nutshell, Q1 2023 is benefiting from this base of last year, which was negative.
Two, the profile of a spread in 2023 is gonna be the opposite of 2022. I take maybe right now U.K. question, and I will let Nathalie answering the two of us. On U.K., yes, we do confirm, we do confirm the numbers we share with you.
As I have explained in my TII presentations, we are very satisfied with the way, the integration is progressing. With good businesses being pragmatic, focusing on the key topics which are delivering results and building the future with the UK team. We do confirm, Jean-François.
Okay, perfect.
On the mix, so several comments, we see a positive mix, especially in some geographies like, I would say South and Western Europe, South Europe mainly. We also have another effect linked to the softer volumes in beer to be very, very honest, which is less, I would say, inaudible driven. We have, I believe, both effects. You know that we are pushing, of course, the most premium products. Still, of course, in not... I mean, it's good to address all the segments, so we do it widely, I would say. We try to do some value-adding, we are doing some value-adding, added pricing, sorry, and pushing the positive mix.
There is also, again, a mechanical effect, linked to the softening of the beer volumes, in this beginning of the year.
Could you quantify or not the impact for the first quarter just to have a magnitude of the positive impact compared to the 40% global mix price effect? I suppose that the price effect is more important, but.
Yes.
Just to have an idea about the impact of the mix.
Yeah. You know that we don't give the detail, so sorry for that. You are right, the price effect is the main one. It's good to see that this mix effect is still positive.
Yes.
part of it is a result of our policy, so.
Do you expect, also a positive impact from the mix effect for the full year?
In fact, we are always very prudent on the mix component, to the EBITDA in our forecast. So far there is no sign. Yeah, we are prudent in our forecast by design, I would say, more by design.
Okay. My last question regarding the guidance. You improve the guidance for the EBITDA above EUR 1 billion versus an average of EUR 1 billion previously.
Could you give us a magnitude of that, +5-10%? Is it +10% reasonable due to the huge Q1 published?
Jean-François, I mean, what we said at the beginning of the year was approximately EUR 1 billion. With a good Q1, we are very confident that we'll be above EUR 1 billion. At this stage, it's very complicated to give you order of magnitude.
Okay.
We stick to our EUR 1 billion. Obviously, a very good start of the year. We'll maybe have a better view later on at the end of July. I mean, with the H1 and a better visibility on H2 due to the volatile and uncertainty of all the macroeconomic fundamentals.
Okay, thank you.
Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We'll now move on to our next question from Moreau Gilani at Societe Generale. Your line is open. Please go ahead.
Yes, hello. Good morning, everyone. I have four questions on my side, follow-ups on the ones asked before. The first one on volumes, so more on a capacity side of things. You commented on the market dynamics, which if I'm correct, you mentioned that should be positive for the full year or slightly positive. On the supply side, given the furnace repairs in the second half of 2022, should we see a favorable comparison basis for volumes in the second half of the year? That's my first question. My second question will be on the energy mix. There was a question on gas shortages. Could you comment perhaps on the evolution of your energy mix on the first quarter 2023? My third question will be on restocking.
Have you started to build back inventories at a Verallia Group level? My third question, given your still, or not still, but a record high liquidity levels, are you still looking at M&A opportunities also given current volatility in the market? Are there still opportunities? Are you still looking at that? Many things.
Thanks a lot, Guillaume, for these four questions. Starting with, volumes are much more related to capacity. What I've just said is that we see some potential upside in front of us. Again, first, France, with less strike or no strike at all in the second half of the year. We have the Jacutinga furnace in Brazil, which is moving full speed. Italy will have a positive impact from our, you know, our scheduled maintenance program because one furnace was stopped since the beginning of the year for a total repair and will resume production in few weeks from now.
All of that should have a positive impact on our capacity compared to Q1. On the energy mix. We prepare and we test all our furnaces to do so. We ramped that at the end of last year and in Q1 this year, and even in the semester, our initial objective was to run with 20% fuel. Based on the reality and current situation without any risk of shortage of gas. We have decided to ramp down our fuel usage.
We are moving down, and we are back to normality in Q2, except in Germany, where we have some contracts for the full semester. We are back to normality. As it was a question previously, if there is any further risk of shortage, obviously we will react and do what is needed to ensure business continuity. Nathalie, about liquidity level, maybe what we can say is nothing new on that. Our capital allocation is always the same. First of all, we focus on our own own investment for capacity, for a decarbonization program, to M&A. If we see a M&A opportunity, again, as we have said, we are open.
Each time it's gonna make sense, each time is going to create value and is going to be aligned with our purpose and values, we will see these opportunities. The last one is about shareholder returns. You have seen what we have done for the dividend for with the full year result 2022. We keep this same policy with this clear ranking.
Thank you. We'll move on to our next question from Lars at Credit Suisse. Your line is open. Please go ahead.
Thank you. Apologies I joined the call a bit late, if some of these questions have been answered, please tell me so. Just coming back to demand, a lot of consumer products companies, including beverage companies, have talked about destocking in the supply chain. Did you see any of that? If that was the case, where do you think we are in the destocking cycle? Also if you can comment on your furnace rebuild schedule, because it was rather light last year, but in H1 but very heavy in H2. Should we expect that also this year? The final point is just trying to again understand a bit about the guidance. Of course, you had an exceptionally strong Q1 and any normal seasonality would normally see Q2 and Q3 being the biggest quarters and Q4 similar to Q1.
You're talking about, of course, the price cost spread now. Just to be clear on that, if you look sequentially out, how should we think about cost inflation? Does that, you know, continue to rise through the year and at stable prices, or do you expect falling prices to reflect energy, for example? Really what I'm asking, how should we think about the exit rate heading into 2024? Because it seems as if the market is taking today's statement as, you know, we're now at peak and we're starting to fall from here onwards. That's all my questions. Thank you.
Thank you for this question. Back in demand, and we have commented a few facts about that. What we have seen in Q1 is a slower start than expected, pure market in Europe, mainly in Germany, but globally in Europe, it is quite low. We have some specific situation like France in, with the national strike impact, which will be really not supporting the overall demand and production. In Latin America, we have some specific situation. In Argentina, we are below, the market is quite low compared to expectations. You know, mainly coming from, this year is gonna be specific.
There is a kind of wait and see situation in Argentina with exports falling down because of the valuations certainly to come. With this, you know, between the gap between the official and the blue dollar in Argentina. By the way, the Argentine government has decided that a few weeks ago to create a specific agro dollar in order to boost a little bit the exportations. We're gonna see if it has an impact. In Argentina we have a kind of current situation which is in my mind, the worst situation we could have, and it should recover down the year. Quite complicated to see what is next. Again, we are vigilant.
We are working with all of our customers who have a good understanding and get all the signals of how the demand is evolving. For us, we still see a slight growth in 2023 compared to 2032. About furnaces, we gonna see for the second part of the year, a similar situation as last year as far as furnace repairs.
No big expectations to come from that except Jacutinga, which is an additional furnace compared to last year, and except obviously the UK parameter. Compared to Q1, we do see some positive impact to come.
With especially in Europe with, one big furnace in Italy, which was a sub. The other question was?
It's on the guidance. On the
Okay.
On the guidance, I mean, yeah, we have reinforced our guidance based on the stronger, I mean, strong quarter we have delivered in this Q1. As we said, we still see cost inflation, and we see cost inflation in some specific areas like raw material and cullet that is even yeah, stronger. This is something that we see keeping going throughout the quarters, indeed, in our in our forecast, even if on some on other elements inflation is easing, I would say. For sure in raw material this is not the case. You have some delayed effects like on labor, et cetera.
That's, that's what I comment on, that's what I can comment on the inflation as you were asking. In Q1 we have this specific one-off of EUR 10 million on the insurance that we won't have also every quarter. That's.
Of course.
That's what I can comment further.
All right. Just to be clear on demand, I don't necessarily if you referred to, of course, what you put in the written comment this morning, right? Yesterday. Specifically around de-stocking, because we've seen significant de-stocking comments from a lot of consumer companies. Have you not seen that in your customer base, which of course would suggest at some stage de-stocking will end, and which would underpin volume growth. Where do we stand on that specific comment? We see part of that, you're right, from our customers. We say especially in the beer segment. We have to cope with it. This is integrated in our forecast to come.
Just maybe to mention as well that we have an opportunity as well on our side to rebuild some inventory and a good inventory level in order to better serve our customers in the months to come. I think we see as well the potential opportunity, as you know, that we were quite globally low in inventory level.
A final point from me. Apologies, I forgot there's one question. Last year you called out packaging prices being a part of the meaningful cost inflation. Of course, we saw huge increases in corrugated packaging, which you use. What are you seeing on that particular part of the cost inflation? Is that starting to move down? We've seen some of the materials, you know, used to make corrugated have come down quite a bit. Are you seeing any changes to that market or pricing?
No. No. You're right. On packaging already, when we commented Q4, we started to say that we see some ease in the packaging inflation. This is the cost nature where spots some cases we see even a slight deflation or at least a plateau. This is true.
Gotcha. Thank you very much.
Thank you for your question.
Thank you. We'll now take our last question once again from Mathias at Deutsche Bank. Your line is open. Please go ahead.
I mean, looking at the share price and the 2.5 notch discount to your main peer, wouldn't you want to rank a share buyback a bit higher and extend the share buyback to, I don't know, 10% of the CapEx? Thanks.
For share buyback, we are in the middle of, actually, very really close to the middle of completing share buyback program that we started end of last year. We will first roll out and execute this program. Then, we've always said again, coming back to capital allocation, that we will do share buyback on an opportunistic basis if we have room for it, if it makes sense. After, you know, the first strategy being first to focus on our organic growth, on our internal CapEx, decarbonization, then M&A opportunities, and then further return to shareholder including share buyback. We are already in the middle of a share buyback program.
Yeah. Thanks again.
Okay. Thank you, Matthias.
Thank you. No further questions in queue. I will now hand it back to Patrice for any closing remarks. Thank you.
I think we have few written questions.
Okay.
If I may. Most of the questions from Iñigo have been answered except this one. Why aren't you increasing the top line guidance after Q1 top line of more than 40%? I see you slightly increased the EBITDA guidance. Why not the top line?
I mean, if I'm quite simple, 1 billion in Q1 by 4 billion, we're gonna be above 20%. This is what we are confirming today. I mean, you know, the economic environment is volatile and uncertain, and we want to stick to that, and we will confirm that. We have better visibility again in few months from now with H1 down, the better visibility for the rest of the year. We stick to our guidance, more than 20% revenue. We have just reinforced the fact that we'll be above our EUR 1 billion Adjusted EBITDA.
The 40%, when we look at the, at the percentage, is really comparing itself to Q1 last year that was at the beginning of the crisis period.
Yeah.
There is a comparison.
Yeah
... a basis, impact as well, in rigor for, when you move on through the year. Thank you. Another question. How do the OpEx maintenance costs of oxy-combustion furnace compare with the traditional furnace?
It's quite early to answer to that question. I mean, let's start first in production with this technology. This technology will be in place in Conflans mid of next year. We'll have a better view, realistic view on that. We do not expect any big variation, to be clear.
Thank you. The last question, what is the current capacity utilization? How much capacity is sold out already for the next 12 months?
Wow. Nice question. First of all, we are running full capacity. We are running full capacity. It's not. And obviously, we are taking the benefit from time to time, depending on the region, to rebuild some inventory, when it's making sense. We are running full capacity. To remind you that except the furnace in Zorya in Ukraine, for the conditions you could understand, we have never stopped any production lines. We are running full capacity.
I think we are, Yeah, we can now.
Okay. Thanks a lot for your time. Thanks a lot for your relevant questions. I wish you all a very good day. Thank you. Bye-bye.
Thank you. Bye-bye.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.