Ardagh Group S.A. - Third Quarter 2019 Results

LUXEMBOURG, Oct. 31, 2019 /PRNewswire/ -- Ardagh Group S.A. (NYSE: ARD) today announced its results for the third quarter ended September 30, 2019.

Paul Coulson, Chairman and Chief Executive, said "The Group reported a strong performance in the third quarter, with notable growth in Glass Europe and Metal Americas. We took advantage of favorable markets during the quarter to further improve our debt maturity profile and obtain material interest savings. We completed the Trivium transaction today, with cash proceeds of $2.5 billion to be used for debt reduction". 

• Revenue of $2,377 million increased by 2% on a constant currency basis;
• Adjusted EBITDA of $424 million increased by 9% at constant exchange rates, led by gains in Glass Packaging Europe and Metal Beverage Packaging Americas;
• Adjusted earnings per share up 15% to $0.60 (2018: $0.52);
• Group volume/mix growth of 2% led by Global beverage can volume³ growth of 7%;
• Refinanced $1,650 million 2024 Senior Notes, yielding $45 million annualized interest savings;
• Metal Food & Specialty business is treated as a Discontinued Operation, following the announced combination with Exal Corporation to form Trivium Packaging. Completion of the transaction took place today, with Ardagh receiving an approximate 43% stake in Trivium Packaging and cash consideration of $2.5 billion;
• 2019 full year outlook:
• Adjusted EBITDA of $1.16 - $1.18 billion, pro forma for the divestment of Food & Specialty (the equivalent previous guidance was at least $1.15 billion);
• Adjusted earnings per share of $1.65 - $1.75, including Food & Specialty until divestment on October 31;
• Net leverage of approximately 4.5x Adjusted EBITDA at December 31, 2019, pro forma for the divestment of Food & Specialty.

Summary Financial Information

Group Performance

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

Completion of the transaction took place today, with Ardagh receiving a stake of approximately 43% in Trivium and $2.5 billion in cash proceeds. The remaining approximately 57% will be controlled by Ontario Teachers.

Following the announcement, the composition of the Group's operating and reporting segments changed. Food and Specialty has been classified as discontinued, following which the Group's four operating and reportable segments are:

• Metal Beverage Packaging Europe
• Metal Beverage Packaging Americas
• Glass Packaging Europe
• Glass Packaging North America.

Group

Revenue of $2,377 million decreased by 1% in the three-month period ended September 30, 2019, compared with the same period last year. On a constant currency basis, revenue increased by 2%, mainly due to increased volumes in Metal Beverage Packaging Europe and Metal Beverage Packaging Americas and the pass through of increased input costs.

Third quarter Adjusted EBITDA of $424 million increased by 6% at actual exchange rates, compared with the same period last year. On a constant currency basis, Adjusted EBITDA increased by 9%, principally due to increased selling prices, including for the pass through of higher input costs, the impact of IFRS 16 of $25 million, and favorable volume/mix effects, partly offset by higher operating costs.

Metal Beverage Packaging Europe

Revenue of $412 million decreased by 1% in the three-month period ended September 30, 2019, compared with the same period last year. On a constant currency basis, revenue increased by 4%, principally due to volume/mix growth, partly offset by lower selling prices. Adjusted EBITDA for the quarter of $68 million decreased by 9% at actual exchange rates and 6% at constant currency rates, compared with the same period last year. The reduction in Adjusted EBITDA principally reflected higher input and other operating costs and lower selling prices due to the pass through of lower input costs, partly offset by favorable volume/mix effects and the impact of IFRS 16 of $3 million.

Metal Beverage Packaging Americas

Revenue increased by 5% to $465 million in the third quarter of 2019, compared with the same period last year. This was principally due to favorable volume/mix effects of 11%, partly offset by the pass through of lower input costs. Adjusted EBITDA of $67 million increased by 18% compared with the prior year, principally reflecting favorable volume/mix effects and the impact of IFRS 16, partly offset by higher operating costs.

Glass Packaging Europe

Revenue of $414 million decreased by 1% at actual exchange rates and increased by 4% at constant exchange rates, in the three-month period ended September 30, 2019, compared with the same period last year. Revenue growth principally reflected higher selling prices, including to recover increased input costs, partly offset by unfavorable, weather impacted volume/mix effects. Adjusted EBITDA for the quarter of $108 million increased by 10% at constant exchange rates, compared with the same period last year, mainly due to higher selling prices, the impact of IFRS 16 and the benefit of short payback capex projects.

Glass Packaging North America

Revenue increased by 1% to $438 million in the third quarter, compared with the same period last year, principally reflecting increased selling prices to recover higher input costs, partly offset by unfavorable volume/mix effects. Adjusted EBITDA for the quarter of $77 million increased by 15%, compared with the same period last year, mainly due to higher selling prices, including to recover increased costs and the impact of IFRS 16, partly offset by increased overhead costs and unfavorable volume/mix effects.

Discontinued Operation

Revenue decreased by 5% to $649 million in the three months ended September 30, 2019, compared with the same period last year principally reflecting unfavorable foreign currency translation effects of $22 million and lower volumes in both business units. Adjusted EBITDA increased by 6% to $104 million, inclusive of the impact of IFRS 16 of $4 million, reflecting cost reduction initiatives in response to lower volumes.

Financing Activity

On August 12, 2019, the Group issued $1,793 million through a combination of Senior Secured Notes and Senior Notes. The net proceeds from the issuance of these notes were used to repay the $1,650 million 7.250% Senior Notes due 2024. These notes were repaid on August 13, 2019. The blended cost of the new debt, after swaps is approximately 3.5% per annum, leading to significant interest cost savings.

Combination of Food & Specialty with Exal



Following completion of the transaction, and in accordance with the July 15, 2019 announcement, Ardagh has today:

• Issued Conditional Redemption Notices in respect of its €440,000,000 4.125% Senior Secured Notes due 2023 and its $1,000,000,000 4.625% Senior Secured Notes due 2023.
• Issued tender offers, at par, in respect of its $715,000,000 4.250% Senior Secured Notes due 2022, €750,000,000 2.750% Senior Secured Notes due 2024, €440,000,000 2.125% Senior Secured Notes due 2026 and $500,000,000 4.125% Senior Secured Notes due 2026 (the "Excess Proceeds Offer"). The Excess Proceeds Offer is expected to expire at 4:00 p.m. (London Time) on November 28, 2019. The announcement date is expected to be November 29, 2019 and the payment date is expected to be December 2, 2019.
• Issued a Conditional Redemption Notice in respect of its €750,000,000 6.750% Senior Notes due 2024.

Earnings Webcast and Conference Call Details

Ardagh Group S.A. (NYSE: ARD) will hold its third quarter 2019 earnings webcast and conference call for investors at 3 p.m. GMT (11 a.m. ET) on October 31, 2019. Please use the following webcast link to register for this call:

Webcast registration and access:

https://event.on24.com/wcc/r/2100767-1/E67A2D3FAF3DCE62ED0CBFE81A494F2F?partnerref=rss-events

Conference call dial in:

United States: +1855 85 70686

International: +44 33 3300 0804

Participant pin code: 85935762#

Slides and quarterly report

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

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

About Ardagh Group

Ardagh Group is a global supplier of infinitely recyclable, metal and glass packaging for the world's leading brands. Ardagh operates more than 50 metal and glass production facilities in 12 countries across three continents, employing over 16,000 people with sales of $7bn.

Forward-Looking Statements

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

Non-GAAP Financial Measures 

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