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Ardagh Group S.A. - Second Quarter 2021 Results

·20 min read

LUXEMBOURG, Aug. 3, 2021 /PRNewswire/ -- Ardagh Group S.A. (NYSE: ARD) today announced its results for the second quarter ended June 30, 2021.

Ardagh Group logo 2019 (PRNewsfoto/Ardagh Group S.A.)
Ardagh Group logo 2019 (PRNewsfoto/Ardagh Group S.A.)












June 30, 2021


June 30, 2020


Change


Constant
Currency



($'m except per share data)





Revenue


1,874


1,606


17%


11%

Loss for the period


(25)


(64)





Loss per share


(0.10)


(0.27)





Adjusted EBITDA (1)


325


271


20%


14%

Adjusted earnings per share (1)(2)


0.45


0.37














Dividend per share declared (3)


0.15 cents


0.15 cents
















At June 30, 2021


At December 31, 2020





Net debt to LTM Adjusted EBITDA (4)


5.0x


4.9x





Paul Coulson, Chairman and Chief Executive, said "The Group performed very well in the quarter, with strong Adjusted EBITDA growth led by advances of 18% in Ardagh Metal Packaging ("AMP") and 36% in Glass Packaging Europe. Our growth investments across our business are on track and we expect to deliver further progress in the second half of the year."

  • Revenue of $1.9 billion increased by 11% at constant exchange rates, due to higher shipments in both metal and glass, as well as the pass through of increased input costs.

  • Adjusted EBITDA increased by 14% at constant currency, with strong growth in AMP and Glass Packaging Europe.

  • AMP shipments increased by 3% in the quarter, after a cyber incident impact of 4%, and measured against a strong comparable. Specialty can volumes increased by 16%, with double-digit growth in all regions, and represented 46% of total shipments. Adjusted EBITDA increased by 18% at constant currency to $173 million. AMP LTM Adjusted EBITDA increased to $613 million at June 30, 2021.

  • Glass Packaging shipments increased by 7% in the quarter, led by 10% growth in Europe. Adjusted EBITDA increased by 19%, reflecting a 36% increase in Glass Packaging Europe, where demand recovered strongly compared with the same quarter in the prior year.

  • Growth investment projects continued to progress across the Group during the quarter and are fully on track.

  • Separate listing of AMP on NYSE as a pure play beverage can producer, via combination with Gores Holdings V Inc, is progressing to completion.

  • Cash and available liquidity of $4.0 billion at June 30, 2021.

  • Commitment of $50 million in a 10-year partnership with Project Lead the Way, to promote STEM education in all communities where Ardagh Group operates across the US.

  • Re-iterating 2021 Guidance: Adjusted EBITDA of $1.28 - $1.30 billion in 2021 with end of year reported net leverage of around 5x LTM Adjusted EBITDA. Third quarter Adjusted EBITDA is expected to be $335-345 million.

Financial Performance Review

Bridge of 2020 to 2021 Revenue and Adjusted EBITDA

Three months ended June 30, 2021


Revenue


Ardagh Metal Packaging Europe


Ardagh Metal Packaging Americas


Ardagh Glass Packaging Europe


Ardagh Glass Packaging North America


Group



$'m


$'m


$'m


$'m


$'m

Revenue 2020


395


435


368


408


1,606

Organic


30


92


32


37


191

FX translation


39



38



77

Revenue 2021


464


527


438


445


1,874












Adjusted EBITDA


Ardagh Metal Packaging Europe


Ardagh Metal Packaging Americas


Ardagh Glass Packaging Europe


Ardagh Glass Packaging North America


Group



$'m


$'m


$'m


$'m


$'m

Adjusted EBITDA 2020


70


69


76


56


271

Organic


8


19


30


(3)


54

FX translation


7



8



15

Adjusted EBITDA 2021


85


88


114


53


340

AMP indemnification










(15)

Adjusted EBITDA 2021










325












2021 margin %


18.3%


16.7%


26.0%


11.9%


17.3%

2020 margin %


17.7%


15.9%


20.7%


13.7%


16.9%


Six months ended June 30, 2021

Revenue


Ardagh Metal Packaging Europe


Ardagh Metal Packaging Americas


Ardagh Glass Packaging Europe


Ardagh Glass Packaging North America


Group



$'m


$'m


$'m


$'m


$'m

Revenue 2020


780


879


752


817


3,228

Organic


49


151


25


53


278

FX translation


71



71



142

Revenue 2021


900


1,030


848


870


3,648












Adjusted EBITDA


Ardagh Metal Packaging Europe


Ardagh Metal Packaging Americas


Ardagh Glass Packaging Europe


Ardagh Glass Packaging North America


Group



$'m


$'m


$'m


$'m


$'m

Adjusted EBITDA 2020


124


130


165


125


544

Organic


15


40


31


(17)


69

FX translation


12



15



27

Adjusted EBITDA 2021


151


170


211


108


640

AMP indemnification










(15)

Adjusted EBITDA 2021










625












2021 margin %


16.8%


16.5%


24.9%


12.4%


17.1%

2020 margin %


15.9%


14.8%


21.9%


15.3%


16.9%

Review of the three months ended June 30, 2021

Group Performance

Revenue in the three months ended June 30, 2021 increased by $268 million, or 17%, to $1,874 million, compared with $1,606 million in the three months ended June 30, 2020. The increase in revenue is primarily driven by favorable volume/mix effects, which includes an impact of the Group's growth investment program, the pass through to customers of higher input costs, and favorable foreign currency translation effects of $77 million.

Adjusted EBITDA in the three months ended June 30, 2021 increased by $54 million, or 20%, to $325 million, compared with $271 million in the three months ended June 30, 2020. The increase was primarily driven by volume/mix growth in AMP and in Glass Packaging, including from the impact of the Group's business growth investment program, lower COVID-19 related costs and favorable foreign currency translation effects of $15 million, partly offset by $15 milllion costs related to the cyber security incident indemnification to AMP.

Ardagh Metal Packaging Europe

Revenue increased by $69 million, or 17%, to $464 million in the three months ended June 30, 2021, compared with $395 million in the three months ended June 30, 2020. Excluding favorable foreign currency translation effects of $39 million, revenue increased by $30 million, mainly due to the pass through of higher metal costs.

Adjusted EBITDA increased by $15 million, or 21%, to $85 million in the three months ended June 30, 2021, compared with $70 million in the three months ended June 30, 2020. Excluding favorable foreign currency translation effects of $7 million, Adjusted EBITDA increased by $8 million reflecting higher selling prices, including to recover increased input costs and a positive impact from the Group's business growth investment program.

Ardagh Metal Packaging Americas

Revenue increased by $92 million, or 21%, to $527 million in the three months ended June 30, 2021, compared with $435 million in the three months ended June 30, 2020. The increase in revenue principally reflected favorable volume/mix effects and the pass through of higher metal costs.

Adjusted EBITDA increased by $19 million, or 27%, to $88 million in the three months ended June 30, 2021, compared with $69 million in the three months ended June 30, 2020. The increase was mainly driven by favorable volume/mix effects, which includes an impact of the Group's business growth investment program.

Glass Packaging Europe

Revenue increased by $70 million, or 19%, to $438 million in the three months ended June 30, 2021, compared with $368 million in the three months ended June 30, 2020. Excluding favorable foreign currency translation effects of $38 million, revenue increased by $32 million, principally due to favourable volume/mix growth.

Adjusted EBITDA increased by $38 million, or 50%, to $114 million in the three months ended June 30, 2021, compared with $76 million in the three months ended June 30, 2020. Excluding favorable foreign currency translation effects of $8 million, Adjusted EBITDA increased by $30 million, principally due to favourable volume/mix effects, which includes an impact of the Group growth investment program, as well as lower operating costs due to less production downtime than in the same quarter of 2020.

Glass Packaging North America

Revenue increased by $37 million, or 9%, to $445 million in the three months ended June 30, 2021, compared with $408 million in the three months ended June 30, 2020. The increase in revenue reflected favorable volume/mix effects.

Adjusted EBITDA decreased by $3 million, or 5%, to $53 million in the three months ended June 30, 2021, compared with $56 million in the three months ended June 30, 2020. The decrease in Adjusted EBITDA was mainly driven by increased freight costs and costs associated with the cyber security incident.

Cyber Incident

On May 17, 2021, the Group announced that it had experienced a cyber security incident, the response to which included pro-actively shutting down certain IT systems and applications used by the business. Key systems have now been brought back online securely, in a phased manner and in line with our plan. Production at all of our manufacturing facilities continued to operate throughout this period, though we experienced some shipping delays as a result of this incident.

While investigation of the incident is ongoing, we have already taken various steps, including engaging leading industry specialists to conduct a forensic investigation of our systems and introducing additional protection tools across our network to further enhance the security of our IT systems. We believe that our existing information technology control environment is appropriately robust and consistent with industry standards. In addition to addressing any findings from these investigations and assessments, we are reviewing our information technology roadmap and accelerating planned IT investments to further improve the effectiveness of our information security. We do not believe that our growth investment program has been impacted by this incident. During the three month ended June 30, 2021, the Group incurred $34 million of costs related to this incident, including $16 million of exceptional costs. The Ardagh Metal Packaging business incurred $16 million of the total Group costs, including $1 million exceptional related costs, due to this incident, which the Company has agreed to indemnify under the letter agreement dated May 21, 2021. We maintain appropriate insurance in respect of a wide range of risks, including in respect of IT incidents and expect to recover costs in respect of this incident.

Combination of Ardagh Metal Packaging with Gores Holdings V

On February 22, 2021, the Group entered into a business combination agreement with Gores Holdings V Inc., a special purpose acquisition company sponsored by an affiliate of The Gores Group ("Gores Holdings V") under which Gores Holdings V will combine with Ardagh's metal packaging business to create an independent, pure-play beverage can public company, Ardagh Metal Packaging S.A. ("Ardagh Metal Packaging" or "AMP"). AMP also announced its intention to apply to list its shares on the NYSE.

Additional investors committed to participate in the proposed business combination by purchasing 60 million shares of AMP for an aggregate purchase price of $600 million in a private placement at $10.00 per share.

In connection with the transactions, on March 12, 2021, two affiliates of the Ardagh Group (the "Co-Issuers") issued green bonds of $2.8 billion equivalent, consisting of €450 million 2.000% Senior Secured Notes due 2028, $600 million 3.250% Senior Secured Notes due 2028, €500 million 3.000% Senior Notes due 2029 and $1,050 million 4.000% Senior Notes due 2029 (the "AMP Notes Issuance").

On completion of the AMP transfer on April 1, 2021, $2.3 billion of the proceeds of the AMP Notes Issuance was paid to the Group on their release from escrow. In addition to such cash consideration, a promissory note in the amount of $1,085 million was issued by AMP to Ardagh Group S.A. (the "AMP Promissory Note") and Ardagh Group S.A. also has a contingent right to receive upon the achievement of certain performance measures up to 60.73 million additional shares in AMP (the "Earnout Shares").

In connection with the AMP Notes Issuance, the Group designated the Co-Issuers and the AMP entities as unrestricted subsidiaries under its bond indentures and the Global Asset Based Loan Facility.

On April 1, 2021, the Group reduced the size of Global Asset Based Loan Facility from $700 million to $500 million in connection with the designation of the AMP entities as unrestricted subsidiaries.

Assuming no share redemptions by the public stockholders of Gores Holdings V, approximately $525 million in cash held in Gores Holdings V's trust account, together with the $600 million in private placement proceeds will be used to settle the AMP Promissory Note as well as to pay transaction expenses. Together with the $2.3 billion cash payment the Group received on April 1, 2021 from the AMP Notes Issuance, an amount up to $3.4 billion in cash will be paid in cash to the Group, with the remainder of the AMP Notes issuance used to pay transaction expenses and for general corporate purposes.

On July 7, 2021, the Securities and Exchange Commission declared effective the registration statement on Form F-4 filed by AMP with respect to the proposed business combination. The proposed business combination, which has been approved by the boards of directors of both Ardagh and Gores Holdings V, is expected to close in August 2021, subject to receipt of Gores Holdings V stockholder approval at a special meeting of stockholders on August 3, 2021, approval of AMP's shares for listing on the NYSE, the satisfaction of the condition to Ardagh's obligations that it receives at least $3 billion in cash from the transactions including the $2.3 billion it received on April 1, 2021 from the AMP Notes Issuance and the satisfaction or waiver of other customary closing conditions.

Upon closing of the transactions, assuming no redemptions by Gores Holdings V's public stockholders, the Group will retain an equity interest in AMP of approximately 80%, investors in the private placement will hold approximately 10% and Gores Holdings V's stockholders and its sponsor will hold approximately 10%.

Earnings Webcast and Conference Call Details

Ardagh Group S.A.

Ardagh Group S.A. (NYSE: ARD) will hold its second quarter 2021 earnings webcast and conference call for investors at 4 p.m. BST (11 a.m. ET) on August 3, 2021. Please use the following webcast link to register for this call:

Webcast registration and access:

https://event.webcasts.com/starthere.jsp?ei=1480643&tp_key=25fe410375

Conference call dial in:

United States: +1 646 828 8199
International: +44 (0)330 336 9104
Participant pin code: 859043

Slides and quarterly report

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

The 2021 interim report for ARD Finance S.A., issuer of the Senior Secured Toggle Notes due 2027, will be published in due course and available at http://www.ardholdings-sa.com/.

Ardagh Metal Packaging

Ardagh Metal Packaging will hold a second quarter 2021 earnings webcast and conference call for investors at 2 p.m. BST (9 a.m. ET) on August 3, 2021. Please use the following webcast link to register for this call:

Webcast registration and access:

https://event.webcasts.com/starthere.jsp?ei=1480554&tp_key=cca6fa6e83

Conference call dial in:

United States: +1 323 794 2095
International: +44 330 336 9104
Participant pin code: 182599

About Ardagh Group

Ardagh Group is a global supplier of infinitely recyclable metal and glass packaging for the world's leading brands. Ardagh operates 57 metal and glass production facilities in 12 countries, employing more than 16,000 people with sales of approximately $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 financial measures such as Adjusted EBITDA, working capital, Adjusted 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.

Unaudited Consolidated Condensed Income Statement for the three months ended June 30, 2021 and 2020




Three months ended June 30, 2021


Three months ended June 30, 2020



Before


Exceptional




Before


Exceptional





exceptional items


items


Total


exceptional items


items


Total



$'m


$'m


$'m


$'m


$'m


$'m

Revenue


1,874



1,874


1,606



1,606

Cost of sales


(1,583)


(11)


(1,594)


(1,371)


(2)


(1,373)

Gross profit


291


(11)


280


235


(2)


233

Sales, general and administration expenses


(86)


(21)


(107)


(75)


(3)


(78)

Intangible amortization


(60)



(60)


(58)



(58)

Operating profit


145


(32)


113


102


(5)


97

Net finance expense


(99)


(8)


(107)


(71)


(74)


(145)

Share of post-tax loss in equity accounted joint venture


(14)


(5)


(19)


(13)


(4)


(17)

Profit/(loss) before tax


32


(45)


(13)


18


(83)


(65)

Income tax (charge)/credit


(13)


1


(12)


(8)


14


6

Profit/(loss) from continuing operations


19


(44)


(25)


10


(69)


(59)

Loss from discontinued operation, net of tax






(5)


(5)

Profit/(loss) for the period


19


(44)


(25)


10


(74)


(64)














Loss per share:






($0.10)






($0.27)

Unaudited Consolidated Condensed Income Statement for the six months ended June 30, 2021 and 2020




Six months ended June 30, 2021


Six months ended June 30, 2020



Before


Exceptional




Before


Exceptional





exceptional items


items


Total


exceptional items


items


Total



$'m


$'m


$'m


$'m


$'m


$'m

Revenue


3,648



3,648


3,228



3,228

Cost of sales


(3,079)


(14)


(3,093)


(2,731)


(2)


(2,733)

Gross profit


569


(14)


555


497


(2)


495

Sales, general and administration expenses


(186)


(26)


(212)


(173)


(6)


(179)

Intangible amortization


(121)



(121)


(116)



(116)

Operating profit


262


(40)


222


208


(8)


200

Net finance expense


(168)


(13)


(181)


(105)


(74)


(179)

Share of post-tax loss in equity accounted joint venture


(19)


(18)


(37)


(12)


(8)


(20)

Profit before tax


75


(71)


4


91


(90)


1

Income tax charge


(29)


3


(26)


(32)


28


(4)

Profit/(loss) from continuing operations


46


(68)


(22)


59


(62)


(3)

Profit from discontinued operation, net of tax






22


22

Profit/(loss) for the period


46


(68)


(22)


59


(40)


19














(Loss)/earnings per share:






($0.09)






$0.08

Unaudited Consolidated Condensed Statement of Financial Position






At June 30, 2021


At December 31, 2020


$'m


$'m





Non-current assets




Intangible assets

2,607


2,756

Property, plant and equipment

3,238


2,945

Other non-current assets

681


717


6,526


6,418

Current assets




Inventories

1,024


923

Trade and other receivables

1,245


869

Cash and cash equivalents

3,541


1,267

Other current assets including contract assets

232


175


6,042


3,234

TOTAL ASSETS

12,568


9,652





TOTAL EQUITY

(264)


(361)





Non-current liabilities




Borrowings including lease obligations

9,538


6,764

Other non-current liabilities

1,115


1,261


10,653


8,025

Current liabilities




Borrowings including lease obligations

100


97

Payables and other current liabilities

2,079


1,891


2,179


1,988

TOTAL LIABILITIES

12,832


10,013

TOTAL EQUITY and LIABILITIES

12,568


9,652

Unaudited Consolidated Condensed Statement of Cash Flows




Three months ended June 30,


Six months ended June 30,



2021


2020


2021


2020



$'m


$'m


$'m


$'m

Cash flows from operating activities









Cash generated from operations


279


295


267


104

Interest paid


(114)


(73)


(133)


(157)

Income tax paid


(15)


(11)


(19)


(23)

Cash flows from/(used in) operating activities


150


211


115


(76)










Cash flows used in investing activities









Capital expenditure


(182)


(104)


(429)


(230)

Other investing cash flows




(13)


Cash flows used in investing activities


(182)


(104)


(442)


(230)

Proceeds from disposal of discontinued operation



32



32

Net cash used in investing activities


(182)


(72)


(442)


(198)










Cash flows from financing activities









Changes in borrowings, net


2,763


501


2,757


1,315

Early redemption premium paid



(61)



(61)

Lease payments


(28)


(23)


(55)


(45)

Other financing cash flows


(97)


(86)


(106)


(91)

Net cash inflow from financing activities


2,638


331


2,596


1,118










Net increase in cash and cash equivalents


2,606


470


2,269


844










Cash and cash equivalents at beginning of period


921


962


1,267


614

Foreign exchange gains/(loss) on cash and cash equivalents


14


16


5


(10)

Cash and cash equivalents at end of period


3,541


1,448


3,541


1,448

Financial assets and liabilities

At June 30, 2021, the Group's net debt and available liquidity was as follows:




Drawn amount


Undrawn amount



$'m


$'m

Senior Secured and Senior Notes


6,547


Global Asset Based Loan Facility



469

Lease obligations


252


Other borrowings/credit lines



1

Restricted Group total borrowings / undrawn facilities


6,799


470

Senior Secured and Senior Notes


2,779


Lease obligations


194


Other borrowings/credit lines


5


Unrestricted Group total borrowings / undrawn facilities


2,978


Total borrowings / undrawn facilities


9,777


470

Deferred debt issue costs and bond discounts / bond premium


(139)


Net borrowings / undrawn facilities


9,638


470

Cash and cash equivalents


(3,541)


3,541

Derivative financial instruments used to hedge foreign currency and interest rate risk


79


Net debt / available liquidity


6,176


4,011

Reconciliation of (loss)/profit for the period to Adjusted profit




Three months ended June 30,


Six months ended June 30,



2021


2020


2021


2020



$'m


$'m


$'m


$'m

(Loss)/profit for the period


(25)


(64)


(22)


19

Share of post-tax loss in equity accounted joint venture


19


17


37


20



(6)


(47)


15


39

Exceptional items, net of tax


39


70


50


32

Intangible amortization, net of tax


46


45


93


89

Gains on derivative financial instruments, foreign currency and other items


14


(1)


10


(21)



93


67


168


139

Share of Adjusted profit in equity accounted joint venture


14


20


26


21

Adjusted profit for the period


107


87


194


160










Weighted average common shares


236.37


236.36


236.37


236.36










Earnings per share


(0.10)


(0.27)


(0.09)


0.08










Adjusted earnings per share


0.45


0.37


0.82


0.68

Reconciliation of loss from continuing operations for the period to Adjusted EBITDA, Adjusted operating cash flow and Adjusted free cash flow




Three months ended June 30,


Six months ended June 30,



2021


2020


2021


2020



$'m


$'m


$'m


$'m

Loss from continuing operations


(25)


(59)


(22)


(3)

Income tax charge/(credit)


12


(6)


26


4

Net finance expense


107


145


181


179

Depreciation and amortization


180


169


363


336

Exceptional operating items


32


5


40


8

Share of post-tax loss in equity accounted joint venture


19


17


37


20

Adjusted EBITDA


325


271


625


544

Movement in working capital


(30)


37


(320)


(372)

Exceptional restructuring paid





(1)

Capital expenditure (5)


(182)


(104)


(429)


(230)

Lease payments


(27)


(21)


(53)


(43)

Adjusted operating cash flow


86


183


(177)


(102)

Interest paid


(114)


(73)


(133)


(157)

Income tax paid


(15)


(11)


(19)


(23)

Adjusted free cash flow


(43)


99


(329)


(282)

Related Footnotes

(1) For a reconciliation to the most comparable GAAP measures, see the back of this release.

(2) Adjusted earnings per share and Adjusted profit for the three and six months ended June 30, 2021 include the Group's share of the Adjusted profit/(loss) of its material equity accounted joint venture, Trivium Packaging B.V..

(3) Payable on October 1, 2021 to shareholders of record on September 17, 2021.

(4) Net debt is comprised of net borrowings and derivative financial instruments used to hedge foreign currency and interest rate risk, net of cash and cash equivalents and restricted cash held in escrow. Net borrowings comprises non-current and current borrowings including lease obligations.

(5) Capital expenditure for the three and six months ended June 30, 2021, includes $110 million and $272 million respectively (2020: $35 million and $76 million) relating to the Group's Business Growth Investment program.

Cision
Cision

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SOURCE Ardagh Group S.A.