Curtis Woodworth: Understood. Thank you.
Oliver Graham: Thanks.
Operator: And our next question will come from Arun Viswanathan with RBC Capital Markets.
Arun Viswanathan: Great. Thanks for taking the question. Congrats on the solid results. Just curious about some of the volume growth that you saw in the quarter and what you’re kind of expecting over the next few quarters. So in North America, do you expect to kind of remain in that pretty elevated level, say, 13% or double-digit volume growth? And if so, is that being driven by an increased promotional activity level or is it mainly, I guess, comp driven? And then secondly, in Europe, now this is, again, a pretty decent recovery from some weaker results last year, do you think that this is sustainable? What do you really think is driving it just given that we are still seeing some relatively muted consumer trends and demand growth over there? Thanks.
Oliver Graham: Sure. Yeah. And so on — so again on Europe, I think two or three things driving it. I think our customers clearly leaning into volume relative to price compared to last year, where a number of big customers, particularly on the beer side went very heavy on price, and therefore, lost a lot of volume, and so we see a significant reversal on that strategy and therefore increased volumes from increased promotions or better — lower pricing at the shelf. I think we are very competitive at the moment as can in Europe in the substrate mix with the energy cost impacts on other substrates and also the sustainability issues on other substrate sales. I think we’re clearly winning in the mix. And although, I agree it’s not that the economies are doing particularly well, but they are doing a bit better than anticipated.
So I think you’ve got all three factors. And certainly, retailers have been pushing hard on getting back to their value for money propositions in Europe. So that all gives us encouragement that these trends can be sustained and we could see Q2 a tick up — a tick or two up on Q1, if these trends continue in Europe and then we’re not predicting anything different than our full year guidance for the rest of the year at this point. North America, I think, will be down a little bit in Q2 on Q1, just because we had some very strong comps in Q2 last year. So we don’t anticipate hitting high these levels through Q2, Q3. And I think our guide is mid to high-singles for the year. So I think we’re comfortable with that still. And then Brazil is also not going to have such a necessarily strong quarter, hard to call in Brazil because things are pretty volatile, depending on the retail pricing environment.
But — so I think Americas will still be very solid through Q2 and the rest of the year as we’ve given in our guide, but maybe not quite at the level of Q1. The trends are pretty encouraging in both markets, like I mentioned. We see good growth still in energy in the U.S. CSB pretty good and pretty good particularly in cans, sparkling water have been very strong in Q1. And actually, we’ve had good growth on the sort of sell to FMB side of the house as well in North America, which is encouraging. And in Brazil, as I mentioned, the whole industry up 16%. So we’ve clearly got pack mix shift coming back into cans. So yeah, lots of positive trends, I think, to support our full year guide.
Arun Viswanathan: Great. Thanks for that. And just as a follow-up, it sounds like maybe can you characterize utilization rates in those regions and I guess, implications for pricing. I know I’m not sure if contracts are maybe coming up for renewal in ’23 through ’24, or how did you characterize both the utilization rate environment across those regions and the potential for continued kind of good price negotiations? Thanks.
Oliver Graham: Yeah. I mean we’re weighted more at 26, 27 than 25, particularly in North America. So nothing strongly happening right now. But I think we said low 90s was where we think the industry is and where we are in Europe and North America. Nothing particular to change that yet. Obviously, we need to see our peers report out to understand the overall Q1 picture. So we assume we’re roughly in that sort of space. And I think we’d reiterate the messages we gave in February, which is we’re not seeing anything to concern us on the big scale in either market in terms of pricing. We definitely did see some increased activity on pricing with regional customers, in particular, in Europe in the back half of last year when we went into budget and planning season with some softness in the market. But if we take it at the macro level, we’re not seeing anything to concern us. In terms of the contract or the recontracting, that’s going to go on between 2025 and 2027.
Arun Viswanathan: Thanks.
Oliver Graham: Thanks.
Operator: And our next question will come from Ning Yang with Jupiter Asset Management.
Ning Yang: Hi. Could you provide some quantitative guidance on your expectation of cash interest, cash tax, extraordinary cost below the adjusted EBITDA line? And also, I just want to confirm, you said that your growth CapEx for next year for 2025 will be even lower than ’24, would be like roughly half of kind of ’24 CapEx would be your kind of rough estimate? You did confirm that the dividend policy is unchanged. So do you expect to help this dividend policy for the medium to long term, i.e. in the next two, three to five years or that dividend policy is mainly for — in respect of ’24. Thank you.
David Bourne: Hi, Ning. Thanks for your questions. Let’s hope I captured all them in terms. So perhaps I’ll work backwards. So no change to our capital allocation strategy. So our dividend policy is exactly as it has been. And of course, we just announced the $0.10 per quarter. The Board will determine the policy going forward every quarter, but no anticipation of any change there from our perspective. So flat guidance. I’m obviously not going to cut on three years out at this stage in proceeding. In terms of CapEx, I think your directional is right. So we’ve said that we will definitely have a reduction in growth CapEx next year. Could it be of the order of half what we’re projecting for this year? Yeah, I think that’s not far from being the right ball park.
And then lastly, in terms of cash flow guidance, I think our cash flow guidance is largely unchanged from the guidance we gave in February. And I think I did a relatively comprehensive cash flow walk at that point in time. So we said working capital would be a modest inflow maybe of the order of $40 million to $50 million maintenance CapEx around about $120 million mark, as I’ve said in my remarks. Operating exceptionals 30 to 40 outflow, lease repayments, 90-ish outflow, cash interest paid $200 million outflow something of that order and then cash tax approximately $35 million. So I think those are the moving parts you think got the BGI around about $100 million and the rest is below the free cash flow line.
Operator: Thank you. And we will take our next question from Chris Lang (ph) with Federated Hermes.
Unidentified Participant: Hi. Good morning. Good afternoon, guys. Just one quick question. You’ve drawn down your ABL this quarter. Could you just elaborate a little bit more as to why you’ve done that? And then also could you tell us what the interest rate on the ABL is? Thanks.
David Bourne: Chris, hi. So yeah, it’s quite normal for us to draw down the asset-backed loan facility at this point in the year, whereas our working capital low points. And therefore, the facility is aimed to help the seasonality of our business, that’s the purpose of it being there. So Q1 is our traditional time to draw down on this. And if you look at the comparative last year, you’ll see the same. The interest rate on it is about 5.9%, I think, something of that quarter.
Unidentified Participant: Brilliant. Thank you very much.
Operator: [Operator Instructions] Our next question will come from Paul Simenauer with BNP Paribas. Paul, you may begin your line is open. And Paul, I do apologize, I am still having a hard time hearing you. We are going to go ahead and take another question from Chris Lang with Federated Hermes. But Paul, if you hear me you may re-signal, and hopefully, we can add to your question. Chris, you may begin.
Unidentified Participant: All right. Sorry, just one – thank you. So just actually another question. The Apollo loan that is backed on, I think I’m quoting here all material assets of AMP. Could you give us a little bit more color as to exactly what material assets mean? Does it mean 100% of that AMP restricted group or are there some small carve-outs here and there that we should be aware of?
David Bourne: Chris, I think it’s relatively simple. It’s a pledge on the equity, both the preferred and the ordinary equity that AIHS holds in the business, which is the entire stake that Ardagh Group holds in it. So I don’t know any carve out from that, but just to be clear, it’s only equity. So it’s not directly on AMP assets.
Unidentified Participant: Understood. Thank you very much.
Operator: All right. We are going to attempt to hear from Mr. Simenauer again with BNP Pariba. Paul, you may begin.
Paul Simenauer: Hi. Thanks so much for taking my questions. First, I just wanted to ask on the AMPEV dividend. Can the financing from Apollo at AIHS prevent that dividend going to the Ardagh-restricted group? And then just want to reconfirm that the preferreds are indeed part of the equity pledge in that transaction. Thank you.
Oliver Graham: Yeah. So I think the second one, we can confirm that. And then, in terms of dividend, obviously, dividend policy is an AMP Board matter. But any questions on sort of what happens to it then, I think best directed on the AGSA call. The AMP Board will decide what dividend we pay. And at the moment, as we said, we’re just reaffirming our current dividend policy.
Paul Simenauer: Okay. Thank you so much.
Operator: And we can take our next question from Gabriel Hajde with Wells Fargo Securities.
Gabrial Hajde: Oliver, David, Stephen, good morning. Good afternoon, I guess. One quick one. I think Oli, you talked about maybe coming out of 2023 with about $60 million or $70 million or so of trapped fixed overhead under absorption. Just can you confirm that number for us, if we kind of continue at the pace and hit the mid-single digit blended organic growth here and ’24, what that number could look like going into in ’25. And then any other, I guess, non-volume related price cost items that we should be thinking about that are hitting this year that are abnormal or out of pattern, if you will? Thank you.
