Ardagh Metal Packaging(AMBP) - 2022 Q2 - Quarterly Report

Unaudited Consolidated Interim Financial Statements Consolidated Interim Income Statement For the three months ended June 30, 2022, the company reported revenue of $1,303 million, a significant increase from $991 million in the prior year period; profit for the period rose to $100 million from $26 million; for the six-month period, revenue grew to $2,440 million from $1,930 million, and the company swung to a profit of $157 million from a loss of $48 million in the first half of 2021 Three Months Ended June 30, 2022 vs 2021 ($ million) | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,303 | 991 | +31.5% | | Gross Profit | 164 | 165 | -0.6% | | Operating Profit | 72 | 75 | -4.0% | | Profit for the period | 100 | 26 | +284.6% | | Basic and Diluted EPS | $0.17 | $0.05 | +240.0% | Six Months Ended June 30, 2022 vs 2021 ($ million) | Metric | H1 2022 | H1 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,440 | 1,930 | +26.4% | | Gross Profit | 301 | 314 | -4.1% | | Operating Profit | 113 | 133 | -15.0% | | Profit/(loss) for the period | 157 | (48) | N/A | | Basic and Diluted EPS | $0.26 | $(0.10) | N/A | Consolidated Interim Statement of Comprehensive Income Total comprehensive income for the three months ended June 30, 2022, was $84 million, up from $66 million in the prior year; for the six-month period, total comprehensive income increased significantly to $243 million from $58 million in 2021, driven by both higher net profit and other comprehensive income items like re-measurement of employee benefit obligations Total Comprehensive Income Summary ($ million) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended June 30 | 84 | 66 | | Six months ended June 30 | 243 | 58 | - For the six months ended June 30, 2022, other comprehensive income was $86 million, primarily driven by a $47 million gain from the effective portion of cash flow hedges and a $37 million gain from the re-measurement of employee benefit obligations[10] Consolidated Interim Statement of Financial Position As of June 30, 2022, total assets increased to $5,788 million from $5,325 million at year-end 2021, primarily due to higher property, plant, and equipment and current assets like inventories and receivables; total liabilities also grew to $5,455 million from $5,039 million, largely from an increase in non-current borrowings; total equity rose to $333 million from $286 million Key Balance Sheet Items ($ million) | Account | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | 5,788 | 5,325 | | Property, plant and equipment | 2,047 | 1,842 | | Cash and cash equivalents | 436 | 463 | | Total Liabilities | 5,455 | 5,039 | | Borrowings (Non-current) | 3,395 | 2,831 | | Total Equity | 333 | 286 | Consolidated Interim Statement of Changes in Equity Total equity increased from $286 million at the start of 2022 to $333 million at June 30, 2022; the increase was driven by a profit of $157 million and other comprehensive income of $86 million, which were partially offset by dividends paid of $121 million and the transfer of hedging gains to inventory - Key movements in equity during the first six months of 2022 include: profit for the period ($157 million), other comprehensive income ($86 million), dividends paid ($121 million), and treasury share acquisitions ($3 million)[14] Consolidated Interim Statement of Cash Flows For the six months ended June 30, 2022, the company experienced a net cash outflow from operating activities of $139 million, a significant shift from a $60 million inflow in the prior year, mainly due to increased working capital; net cash used in investing activities was stable at $286 million; net cash inflow from financing activities was $434 million, driven by new borrowings, which offset dividend payments Six Months Ended June 30 Cash Flow Summary ($ million) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | From/(used in) Operating Activities | (139) | 60 | | Used in Investing Activities | (286) | (288) | | From Financing Activities | 434 | 568 | | Net increase in cash | 9 | 340 | - Significant financing activities in H1 2022 included $700 million in proceeds from borrowings and $121 million in dividends paid[17] Notes to the Unaudited Consolidated Interim Financial Statements Note 1-3: General Information and Accounting Policies Ardagh Metal Packaging S.A. is a leading global supplier of metal beverage cans with 24 production facilities in Europe and the Americas; the interim financial statements are prepared in accordance with IAS 34 and are consistent with the accounting policies applied in the 2021 Annual Report; the statements are presented in U.S. dollars - The Group is a leading supplier of metal beverage cans, operating 24 production facilities in Europe and the Americas with approximately 5,800 employees[20] - The unaudited consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" and should be read in conjunction with the Annual Report for the year ended December 31, 2021[23] Note 4: Segment Analysis The Group operates in two segments: Europe and Americas; for the six months ended June 30, 2022, Americas generated $1,408 million in revenue and $209 million in Adjusted EBITDA, while Europe generated $1,032 million in revenue and $117 million in Adjusted EBITDA; total Group Adjusted EBITDA for the period was $326 million, a slight increase from $321 million in the prior year Segment Results - Six Months Ended June 30 ($ million) | Segment | Revenue 2022 | Revenue 2021 | Adj. EBITDA 2022 | Adj. EBITDA 2021 | | :--- | :--- | :--- | :--- | :--- | | Europe | 1,032 | 900 | 117 | 151 | | Americas | 1,408 | 1,030 | 209 | 170 | | Group Total | 2,440 | 1,930 | 326 | 321 | - One customer accounted for more than 10% of total Group revenue across both segments in the first six months of 2022[34] Note 5: Exceptional Items For the six months ended June 30, 2022, the company recorded a net exceptional income of $93 million; this was primarily driven by a $125 million net finance income related to fair value gains on Earnout Shares and Warrants, partially offset by $30 million in start-up costs for investment programs and $8 million in transaction-related costs - Key exceptional items for H1 2022 include: - $30 million in start-up costs related to investment programs - $8 million in transaction-related and other costs - $125 million net exceptional finance income, mainly from a $146 million fair value gain on Earnout Shares and Warrants[43] Note 6-7: Net Finance (Income)/Expense and Earnings Per Share The company reported a net finance income of $63 million for the first six months of 2022, a significant reversal from a $171 million expense in the prior year; this was due to the $125 million exceptional finance income from warrants and earnout shares; basic earnings per share for the six-month period was $0.26, compared to a loss per share of $(0.10) in H1 2021 Earnings Per Share (EPS) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three months ended June 30 | $0.17 | $0.05 | | Six months ended June 30 | $0.26 | $(0.10) | Note 8-9: Assets and Equity As of June 30, 2022, the net book value of property, plant, and equipment (PP&E) increased to $2,047 million from $1,842 million at year-end 2021, reflecting additions of $378 million; intangible assets decreased to $1,513 million; the company also repurchased 443,450 shares for $3 million, which are held as treasury shares Movement in PP&E and Intangible Assets H1 2022 ($ million) | Account | Net Book Value Jan 1, 2022 | Additions | Net Book Value June 30, 2022 | | :--- | :--- | :--- | :--- | | Intangible assets | 1,662 | 3 | 1,513 | | Property, plant and equipment | 1,842 | 378 | 2,047 | - The company repurchased 443,450 shares for $3 million during the six months ended June 30, 2022[53] Note 10: Financial Assets and Liabilities As of June 30, 2022, the Group's net debt stood at $3,008 million, with total borrowings of $3,483 million and cash of $436 million; available liquidity was $761 million, including $325 million from its Global Asset Based Loan Facility; in June 2022, the company issued $600 million of 6.000% Senior Secured Green Notes due 2027 Net Debt and Liquidity as of June 30, 2022 ($ million) | Item | Amount | | :--- | :--- | | Total borrowings | 3,483 | | Cash and cash equivalents | (436) | | Net debt | 3,008 | | Available liquidity | 761 | - On June 8, 2022, the Group issued $600 million in 6.000% Senior Secured Green Notes due 2027[62] Note 11-13: Employee Benefits, Other Liabilities, and Cash Flow Details The company recognized a re-measurement gain of $52 million on employee benefit obligations in H1 2022; other non-current liabilities decreased to $179 million from $325 million, primarily due to a reduction in the fair value of the Earnout Shares liability, which fell from $292 million to $162 million; cash used in operations for H1 2022 was $103 million, a significant decrease from cash generated of $137 million in H1 2021, driven by a $395 million outflow in working capital - The fair value of the Earnout Shares liability, recognized as a financial liability, decreased from $292 million at year-end 2021 to $162 million as of June 30, 2022[67] - The movement in working capital resulted in a cash outflow of $395 million in H1 2022, compared to a $170 million outflow in H1 2021[68] Note 14-19: Dividends, Related Parties, and Other Notes In the first half of 2022, the company paid two cash dividends of $0.10 per share each, totaling $121 million; after the reporting period, in July 2022, the company issued €250 million of preferred shares to its parent company, AGSA, and repurchased an additional 2 million shares for approximately $12 million; the business experiences seasonality, with demand peaking in summer months - The company paid total cash dividends of $121 million ($0.20 per share) in the first six months of 2022[69] - Subsequent to the reporting period, on July 8, 2022, AMP issued €250 million (approx. $260 million) in preferred shares to AGSA[78] - Since June 30, 2022, the company has repurchased an additional 2 million shares for approximately $12 million[78] Management's Discussion and Analysis of Financial Condition and Results of Operations Business Drivers and Overview The company's performance is primarily influenced by consumer demand, raw material prices (especially aluminum), the ability to pass on costs to customers, foreign exchange fluctuations, and the execution of its growth investment program; demand for beverage cans is seasonal, peaking in the summer and around holidays - Key business drivers include: consumer demand, raw material and energy prices, ability to pass through costs, investment in cost reductions, acquisitions, and foreign exchange rates[80] - Demand for beverage products is strongest during warm weather, typically peaking in summer months and before the December holidays[81] Results of Operations This section provides a detailed comparison of financial results for the three and six-month periods ending June 30, 2022, versus 2021; it analyzes the key drivers behind changes in revenue, cost of sales, gross profit, operating expenses, and net income, attributing revenue growth primarily to the pass-through of higher input costs and favorable volume/mix, while gross profit margin declined due to the impact of these higher costs Three months ended June 30, 2022 vs 2021 Revenue for Q2 2022 increased 31% to $1,303 million, driven by passing through higher input costs and favorable volume/mix, partly offset by unfavorable currency effects; gross profit was flat at $164 million, with the gross margin decreasing by 400 basis points to 12.6% due to the impact of higher costs; profit for the period surged to $100 million from $26 million, largely due to a $74 million exceptional finance income from fair value gains on warrants and earnout shares - Q2 2022 revenue grew by $312 million (31%) year-over-year, primarily due to the pass-through of higher input costs and favorable volume/mix, offset by $47 million in unfavorable foreign currency effects[85] - Gross profit margin, excluding exceptional items, decreased by 340 basis points in Q2 2022, mainly because revenue and cost of sales were both elevated by the pass-through of higher input costs[87] - Net finance income was $40 million in Q2 2022 compared to a $22 million expense in Q2 2021, driven by a $74 million exceptional finance income related to fair value movements on Earnout Shares and Warrants[91][94] Six months ended June 30, 2022 vs 2021 For H1 2022, revenue increased 26% to $2,440 million, driven by higher input cost pass-throughs and favorable volume/mix; gross profit decreased 4% to $301 million, with the margin contracting by 400 basis points; the company reported a profit of $157 million, a significant turnaround from a $48 million loss in H1 2021, primarily due to a $125 million exceptional finance income and lower non-exceptional finance costs - H1 2022 revenue grew by $510 million (26%) year-over-year, driven by passing through higher input costs and favorable volume/mix, offset by $77 million in unfavorable currency effects[99] - Operating profit for H1 2022 decreased by $20 million to $113 million compared to H1 2021, due to lower gross profit and higher SG&A expenses[105] - The company swung from a $38 million pre-tax loss in H1 2021 to a $176 million pre-tax profit in H1 2022, largely due to a $234 million positive swing in net finance income/expense[98][106] Supplemental Management's Discussion and Analysis This section focuses on non-IFRS measures, particularly Adjusted EBITDA, and provides further detail on exceptional items and segment performance; Adjusted EBITDA for H1 2022 rose 2% to $326 million, with growth in the Americas segment offsetting a decline in Europe; the analysis highlights the impact of input cost inflation, volume/mix changes, and currency fluctuations on segment profitability Key Operating Measures (Adjusted EBITDA) Adjusted EBITDA for Q2 2022 increased 5% to $181 million; for the first six months of 2022, Adjusted EBITDA grew 2% to $326 million; excluding unfavorable currency effects, Adjusted EBITDA would have increased by $18 million for the six-month period, driven by favorable volume/mix from the growth investment program, which was partly offset by higher operating costs Adjusted EBITDA Performance ($ million) | Period | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | 181 | 173 | +5% | | Six months ended June 30 | 326 | 321 | +2% | Exceptional Items Analysis For the six months ended June 30, 2022, the company recognized a net exceptional income of $93 million; this was primarily composed of a $125 million net finance income from fair value gains on warrants and earnout shares, which was partially offset by $30 million in start-up costs related to investment programs and $8 million in transaction-related costs - The largest exceptional item in H1 2022 was a $125 million net finance income, resulting from a $146 million fair value gain on Earnout Shares and Warrants, partly offset by a $21 million foreign currency loss on these instruments[118] Segment Information In Q2 2022, Americas revenue grew 46% and Adjusted EBITDA grew 36% to $120 million, driven by volume/mix and cost recovery; Europe revenue grew 15%, but Adjusted EBITDA fell 28% to $61 million due to input cost inflation; for the full six-month period, Americas Adjusted EBITDA increased 23% to $209 million, while Europe's decreased 23% to $117 million Q2 2022 Segment Performance ($ million) | Segment | Revenue | Adj. EBITDA | | :--- | :--- | :--- | | Europe | 533 | 61 | | Americas | 770 | 120 | - In H1 2022, Americas Adjusted EBITDA increased by $39 million (23%), driven by strong recovery of input cost inflation and favorable volume/mix from the growth investment program[127] - In H1 2022, Europe's Adjusted EBITDA decreased by $34 million (23%), principally reflecting input cost inflation that was only partly offset by favorable volume/mix[127] Liquidity and Capital Resources As of June 30, 2022, the company had total available liquidity of $761 million, consisting of $436 million in cash and $325 million available under its asset-based loan facility; net debt stood at $3,008 million; cash flow from operations was negative $139 million for H1 2022, a significant decrease from the prior year due to a large working capital outflow; capital expenditure for the period was $286 million, primarily for the growth investment program Cash Requirements and Financing The company's principal financing includes a series of Senior Secured and Senior Green Notes, and a $325 million Global Asset Based Loan Facility; as of June 30, 2022, total borrowings were $3.48 billion, and available liquidity was $761 million; management believes current cash, operating cash flow, and credit facilities are sufficient to fund operations, capital expenditures, and dividends for at least the next twelve months Liquidity Position as of June 30, 2022 ($ million) | Component | Amount | | :--- | :--- | | Cash and cash equivalents | 436 | | Available under Global ABL Facility | 325 | | Total Available Liquidity | 761 | Cash Flows Analysis For H1 2022, cash used in operating activities was $139 million, a $199 million negative swing from H1 2021, primarily due to a $225 million increase in working capital outflows; investing activities used $286 million, consistent with the prior year; financing activities provided a net inflow of $434 million, reflecting $700 million in new borrowings partially offset by $121 million in dividend payments and debt repayments - The working capital outflow increased by $225 million to $395 million in H1 2022, mainly due to increases in trade receivables and inventory[140][135] - Net cash from financing activities was an inflow of $434 million in H1 2022, compared to a $568 million inflow in H1 2021[138] Capital Expenditure Capital expenditure for the first six months of 2022 was $286 million, slightly down from $289 million in the prior year; of this total, $237 million was related to the company's growth investment program; the Americas segment accounted for $193 million of the spending, while Europe accounted for $93 million Capital Expenditure by Segment - H1 ($ million) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Europe | 93 | 74 | | Americas | 193 | 215 | | Total | 286 | 289 | - Capital expenditure for the six months ended June 30, 2022 includes $237 million related to the growth investment program[143] Cautionary Statement Regarding Forward-Looking Statements - The report contains forward-looking statements that involve uncertainty and risk; future financial performance may differ from expectations due to various factors, including economic downturns, competition, raw material costs, customer relationships, and the ability to execute its growth investment program[147]