Solid start to the year with margin recovery underway

Europe
Revenue growth in Europe on a constant currency basis was 37.6% compared with the first quarter of 2022. On a comparable basis, excluding the consolidation of acquisitions, organic revenue increased by 11.2% at constant currency. Performance was driven by price increases which are offsetting cost inflation. Price in­creases in Europe reflect the particularly high raw material and energy cost inflation incurred in 2022 com­pared to the rest of the Group. The region won new filler contracts in food, dairy and plant-based milk alter­natives during the period.

The contribution from bag-in-box and spouted pouch, which were not yet consolidated in the first quarter of 2022, was €46.4 million.

Middle East and Africa
Organic revenue growth at constant currency in Middle East and Africa was 17.9% compared with the first quarter of 2022. Performance reflected strong volume growth in liquid dairy in South Africa, Algeria, Saudi Arabia, and Egypt while price increases offset cost inflation. The region’s strategy of expanding SIG’s presence in dairy and food continued with the growth in one litre packaging for dairy and the launch of white cheese in carton packaging in Qatar.

Performance in Q2 2023 may be impacted by recent currency depreciations such as the Egyptian pound against the Euro. This can lead to quarterly fluctuations in customer demand as Central Banks restrict access to foreign currency. SIG’s broad presence in over 20 countries in the region, however, underpins its longer term growth potential.

Asia Pacific
In Asia Pacific revenue growth at constant currency, including the impact from acquisitions, was 20.2%. On an organic basis, revenue at constant currency declined by 9.8% compared to the first quarter of 2022. Cus­tomer demand in China had a soft start to the year following high levels of COVID-19 cases in January and the early occurrence of Chinese New Year holidays. Demand is now picking up. Price increases to recover cost inflation were implemented in the region and there was notably strong volume growth in Vietnam and India.

The revenue contribution from chilled carton, spouted pouch and bag-in-box was €49.0 million during the quarter.

Americas
Revenue growth at constant currency in the Americas was 112.9% reflecting the contribution from bag-in-box and spouted pouch. Organic revenue growth was 19.8% compared to the first quarter of 2022, reflecting strong growth in Brazil and in the USA. Price increases were also achieved to offset cost inflation.

The region secured a cross selling win with carton’s largest customer in Brazil who signed a contract for asep­tic bag-in-box. The contract includes a full systems solution and a long-term agreement.

The revenue contribution from bag-in-box and spouted pouch was €94.2 million during the quarter.

Adjusted EBITDA
Adjusted EBITDA increased by 47.4% to €175.0 million for the three months ended March 31, 2023 (Q1 2022: €118.7 million). The adjusted EBITDA margin was 24.0%, slightly above the first quarter of 2022 (23.9%) de­spite dilution from acquisitions and from price increases. Compared with the fourth quarter of 2022, the adjusted EBITDA margin increased by 170 basis points (Q4 2022 (22.3%).

Adjusted net income
Adjusted net income increased from €44.5 million to €64.7 million for the three-months ended March 31, 2023. The growth was driven by higher adjusted EBITDA, partially offset by increased financing costs and amortization and depreciation.

Dividend
The Annual General Meeting held on April 20, 2023, approved a dividend distribution out of the capital con­tribution reserve of CHF 0.47 per share for the year 2022. The total dividend, paid out on April 27, was €180.2 million. The Company intends to continue its policy of progressive dividend per share growth with a pay-out ratio within a range of 50-60% of adjusted net income.

Outlook
Guidance for 2023 remains unchanged. The Company expects revenue growth of 20-22% at constant cur­rency. Bag-in-box and spouted pouch will be consolidated for an additional five months and chilled carton for an additional seven months respectively (pass through resin escalators for the bag-in-box and the spouted pouch businesses are excluded from the guidance). Organic revenue growth is expected to be 7-9%. Price increases in the carton business are expected to continue to contribute to top-line growth. The adjusted EBITDA margin is expected to increase by 50-150 basis points, implying a range of 24-25%. The expected improvement compared with 2022 is subject to input cost and foreign currency volatility. Net capital expendi­ture is forecast to be within a range of 7-9% of revenue and the dividend pay-out ratio is expected to be within a range of 50-60% of adjusted net income.