Ardagh Group S.A. (ARD) Q3 2019 Earnings Call Transcript

(Starts Abruptly) show our food and specialty division as classified, as a discontinued operation within the group's results. This follows our announcement last July. But the food and specialty business would be combined with Exal to form Trivium Packaging. And I'm pleased to say that the Trivium transaction completed earlier today. We will talk about that a little later in the call.

Looking to our results for the quarter. We delivered a strong performance, highlights of which are revenue of $2.4 billion, in line with the same period last year and a constant currency growth of 3% in continuing operations. Adjusted EBITDA of $424 million, an increase by 6% compared to the same period last year and slightly ahead of our guidance. Adjusted EBITDA from continuing operations increased by 9% at constant currency.

Adjusted EBITDA margin from continuing operations of 18.5% in the quarter and of 17.7% in the year to date. Three of our four divisions, as well as our discontinued operation recorded constant currency growth and adjusted EBITDA for the quarter. Glass North America continued to stabilize with adjusted EBITDA growth achieved despite ongoing volume softness and this follows the actions that we've taken over the past two years. Adjusted free cash flow for the group was $244 million in the year to date, an increase of 16% on the prior year.

Adjusted earnings per share of $0.60 for the quarter, an increase of 15% on the same period last year and including the impact of lower depreciation charges arising from the Trivium transaction. We ended the quarter with cash and available liquidity of $1.1 billion and that's before the $2.5 billion cash inflow today from the Trivium transaction. Demand for our sustainable packaging products is very strong. We've increased our guidance for the full year with respect to continuing operations to reflect the stronger than expected third quarter return.

So if I turn to reviewing segmental performance for the quarter and my comments here will be focused on constant currency results. Glass Europe performed well in the third quarter, as the strong operating performance combined with our diversified business mix and healthy market dynamics more than offsets some weather related softness in beer markets. Revenue of $414 million increased by 4% compared to the same period last year, with good growth in the food business and increased activity in our engineering business.

Adjusted EBITDA increased by 11% to $108 million in the quarter, compared to the same period in 2018. This growth primarily reflected an improved mix, the strong operating and price cost performance and the impact of IFRS 16. The outlook for Glass in Europe remains very positive. Consumers trust and appreciate the purity and infinite recyclability of the product. While our customers are attracted by stability to deliver their premiumization and sustainability objectives. We have a diversified business across Europe with a proven record of sustainability, quality and innovation and have seen a strong and growing emphasis on partnering with our customers on a long-term contracted basis.

Market fundamentals are attractive, our inventories are low and our capacity for 2020 is at this point in time virtually all sold. Our glass business in North America continued to stabilize in the third quarter in what remains a challenging market, this result reflects the decisive actions we've taken over the past two years. Revenue of $438 million, increased by 1% compared with last year with a 1% decline in volume mix in the quarter. This was offset by the pass through of increased costs.

Beer end markets remained soft, partly offset by growth in wines and spirits. The capacity adjustments to rightsize our footprint combined with initiatives to optimize our cost base since 2017 have enabled us to better manage softer industry demand and our third quarter adjusted EBITDA increased by 15% to $77 million, including IFRS 16 effects.