Ardagh pulls forecasts even though demand for products still strong
First-quarter results in line with company’s expectations
Group sales at Ardagh dipped 1 per cent in the first quarter to $1.62 billion. Photograph: iStock
Glass and metal containers maker Ardagh Group, led by Irish financier Paul Coulson, said on Thursday it was pulling its full-year financial forecasts amid economic uncertainty posed by Covid-19, even though demand for its products have generally remained strong to date.
However, the company has seen a “noticeable decline” in demand for glass bottles in its European business, which is more heavily exposed to cafes, hotels and restaurants than other units, Mr Coulson, the group’s chairman, chief executive and main shareholder, said on a call with analysts.
Group sales dipped 1 per cent in the first quarter to $1.62 billion (€1.5 billion), it said in a trading statement. Earnings before interest, tax, depreciation and amortisation (Ebitda) declined at the same pace to $273 million, which was slightly better than what the company had predicted at the end of February, before the spread of coronavirus triggered widespread lockdowns across western economies.
“First-quarter results were in line with our expectations, with no material impact from Covid-19. The commitment and dedication of our teams during this challenging period has been outstanding, enabling all our production facilities to continue to serve the beverage and food supply chain,” said Mr Coulson.
“It is too early to assess the macroeconomic impact of the pandemic and, accordingly, we are withdrawing our 2020 financial guidance. However, our defensive end markets, proven operating model and $1.5 billion in liquidity position us to successfully manage this uncertain environment.”
The company had previously forecast that its Ebitda for the full year would come to $1.2 billion and that its adjusted free cash flow would amount to between $375 million and $400 million, before business growth investments of about $250 million were deducted.
Trading in the first quarter saw volumes of beverage cans rise 3 per cent, offset by a 2 per cent fall in demand for glass bottles and jars.
Turning to activity since much of the western world went into lockdown in the middle second half of March, Mr Coulson said demand for metal beverage cans in North America had been strong and stable in Europe.
The group’s North American glass business, which has been restructured in recent years as a result of a weakening mass beer market, has experienced a limited impact from Covid-19. It has also been helped in recent months by US tariffs on cheap Chinese imports.
Glass demand in Europe has dropped, however, as this business was more exposed to on-premise consumption, he said. Still, this has been partly offset by solid demand in its food jars operation.
Some 80 per cent of the group’s products are ultimately sold off the premises of hotels, bars, restaurants and cafes.
Ardagh, which is listed on the New York Stock Exchange, set up an internal task force to deal with potential business threats from Covid-19 in early February, with the focus on keeping its 16,000-strong workforce safe and 56 glass and metal plants operating. The company has enhanced hygiene procedures across all its locations, introduced social-distancing practices and encouraged working from home where possible, Mr Coulson said.
The group also boosted its cash position to $1.35 billion through the sale of $500 million of bonds earlier this month.
Ardagh completed a deal last October to fold its metal food containers and speciality business into a joint venture called Trivium, controlled by Ontario Teachers’ Pension Plan Board. Ardagh retains a 42 per cent stake in Trivium.