VERALLIA - 2Q16 RESULTS

The #3 global glass packager Verallia presented solid 2Q16 figures yesterday, hot on the heels of #2 Owens-Illinois results. Organic sales grew by +5% to €643m while EBITDA climbed to €119m (+12%), or an above-peer 18.5% margin. As its rival, the French company is mainly exposed to Europe, representing a huge 90% of sales. The demand for glass bottles has been slowly growing there, fueled by increasing consumption of wine and spirits products and causing organic sales to grow +1%. However, we believe the area remains vulnerable and we expect the wine segment to be affected in the near-term by the recent bad weather conditions in France (30% of sales). By contrast, the outlook seems more promising in LatAm (10%, +32%), where Verallia enjoys better product and client mix than its competitor. While the market experienced strong volume declines in Brazil, the group has clearly outperformed through solid positioning on very highend products while also been helped by the restart of furnaces. Note that the performance was however limited by persistent forex headwinds. Verallia’s clear-cut ambition is to grow on the continent and we will not be surprised by some future bolt-on acquisitions.​