Ardagh Group - comment

Operational results were broadly in line with company guidance, so the bonds should be slightly higher. Given its liquidity of $790m ($420m in cash), Ardagh is well-positioned to weather temporary issues in demand and costs resulting from the conflict in the Gulf. Management reiterated previous guidance for glass volumes being slightly lower in 2026, with the US and Europe down or flat, and Africa positive. Ardagh is considering using some of the proceeds of the AMP Pref share redemption to invest in capex rather than look to repay debt. This should be a surprise, as higher capex in the next couple of years was expected. As EBITDA was well above our expectations, we are reviewing our model to see if we are being overly pessimistic.

Revenue was broadly in line with our expectations, but EBITDA was well ahead as margins recovered much faster than we expected. Management reiterated its target of $700m of EBITDA for the FY. FY expectations for the Glass business from management are for volumes to be around 11% in 2026 (flat in the US, Europe down slightly and Africa up). EBITDA for the FY is expected at around $700m + $200m in Dividends from AMP, Capex ($400m), Cash Interest ($380), Leases ($100m), WC inflow $30m = Cash outflow of $50m.