Specialist
Former C-suite member at Ardagh
Agenda
- Oversupply dynamics in glass packaging
- Utilisation of Ardagh (NYSE: ARD) assets
- Potential sale of Ardagh asset
- 2019-20 outlook
Questions
1.
In our last Interview, your outlook for Ardagh in Europe glass packaging was positive overall, but in the North American glass packaging, its EBITDA has declined around 32%. How do you view the North American glass packaging industry and what pressures is Ardagh under?
2.
What declines did you see in the broader North American glass packaging market in 2017-18?
3.
How do you view the three key competitors’ maturity at the trade-off between closing plants and dropping prices?
4.
What has the margin been at its high points and what would you expect it to be currently?
5.
When contracts come up for retender after the three years, do you have any indication of the typical range of the pricing drops?
6.
How do you think Ardagh’s presence breaks down across those most concentrated regions, East Coast, Midwest and West Coast?
7.
In the beer category, what substitution are you seeing from glass into cans and what acceleration or deceleration do you expect in 2019-20?
8.
What decline are you seeing YoY in beer consumption?
9.
The imported beer market is growing every year by 5% per annum. What do you think are the implications for the amount that the domestic beer market can produce?
10.
How do you view consumer preferences for beer packaging in the US compared to Europe, where there is a preference for glass beer bottles rather than aluminium cans? Do you think this difference might have an environmental focus?
11.
Do you think a shift to plastic could pose a significant risk to glass in the US or in Europe?
12.
Would you expect 2019 to be a better or a worse year than 2018 for beer glass demand in North America?
13.
Which key segments – food, spirits, wine and ready-to-drink – would you say are stable and which ones are shrinking?
14.
With Ardagh at around 2 million tonnes of capacity, what utilisation would you expect from its plants?
15.
What would you say is a glass plant’s breakeven utilisation?
16.
At what point of utilisation would you start to consider reductions in capacity?
17.
With 200,000 tonnes of excess capacity and the closure of a 100,000-tonne plant and another furnace, what is your outlook for Ardagh?
18.
What are the pros and cons of a short-term plant closure vs a long-term closure?
19.
Client (C): Do you think there is any chance of reversal from Snapple back into glass instead of plastic?
20.
C: When Snapple finally does make the shift fully from glass to plastic, what do you think will be the residual left in glass with Anchor? Would it be 5% or even less than that?
21.
C: Owens-Illinois has about 2.3 million tonnes of capacity. What overcapacity would you expect it has in the market?
22.
C: You established that there needs to be two significant plant closures in the market to balance supply and demand. How much does that mean in terms of tonnage?
23.
C: Where would you say those two significant plant closures are most likely to come or is it anyone’s guess?
24.
C: What options do you think Anchor has to bring volume into competition with Ardagh or Owens’s existing volume?
25.
C: In the potential scenario that Anchor drops prices, what do you think would happen?
26.
C: What do you expect to happen between Owens-Illinois and Ardagh? Do they just have to wait until Anchor goes bust or starts closing capacity, or would they eventually stop the pricing war and cut their own capacity?
27.
C: Do you think there is any chance that either Owens or Ardagh will drop prices before Anchor?
28.
C: If Owens cuts its capacity – though the scenario is unlikely – how much do you think it would cut and what do you think would happen after that?
29.
C: You say that Owens is unlikely to show capacity closures. Do you think Ardagh might step up to the plate and close some capacity?
30.
C: How much longer do you think these three players can just do nothing?
31.
C: What is your expected timeframe on the price war?
32.
C: You suggested an 8% decline on the whole market and, apart from beer, every category is either flat or growing by a small amount. You think beer volume is only declining by about 3%. It is possible that the rest of it was just pricing?
33.
C: Has there been any indication in the latest round of contract renewals that this pricing competition is starting?
34.
C: What percentage are you seeing of recycled glass in the US and does it have any significant impact on the competitive landscape for the three key players?
