Gómez (Vidrala): "No vamos a reducir dividendo [...] lo mejor está por llegar"

Well, enough is never enough for a company like Vidrala, a listed company that has based part of its growth and value creation on acquisitions. It's never enough. Now we see it more as a willingness and interest to grow further rather than an obligation. In our world, which is in a phase of outsourcing, globalization, and consolidation, that means that, well, looking left and right, up and down, opportunities will surely arise, and our obligation is to keep our eyes open and act at the right time. Always have some environment. Now, in the short term, in the current situation, the first priority is to maintain prudence—financial prudence and business prudence—recover our operating margins, put them where we believe they should stabilize, and in the meantime, what we can guarantee is that there will be no surprises in the short term, but our eyes are wide open.

Yes, yes, well, fortunately not as much as 80%, but we are living in an abnormal moment, I would say. One can be accustomed to seeing general inflation figures that are generating some impact on society. What I can guarantee is that the industrial inflation figures for a company in whose process there is a percentage of energy consumption are on another level, disproportionate. And well, in the face of normality, what one has to do is try to adapt, wait for normality to return, and of course, pass on as much as possible the costs that, I insist, are abnormally high to our selling prices. We are in a somewhat paradoxical moment, but it also has a very positive side: as our president said earlier in the panel he was invited to, the demand for glass containers—which is the most important thing in the current situation—is in solid circumstances, really solid. It is surprising and remarkable how well the demand for glass containers has behaved in recent years since the pandemic. But that situation, that paradox, coincides at a time when energy costs are skyrocketing. That forces us to pass on part of the cost increases to selling prices, and it also invites us, based on that good demand situation, to remain calm and focus on the long term.

Well, we started the year with a price increase of that level, which unfortunately proved insufficient given the events that immediately arose when the year began, mainly derived from the sad events we are seeing in Ukraine and the levels you mentioned earlier to which energy markets are taking us, especially gas at 300 euros per megawatt hour. I invite you to think, as a reference, of historical levels of 15-20 euros per megawatt hour. So the situation is difficult to sustain. Since April 1, we have been forced to make additional price increases. They are not enough to recover our historical margins. That is, we are doing a burden-sharing: part against ourselves, part we have to pass on to our customers, and surely our customers are forced to pass part on to the final consumer. And that is how the business is working right now, the consumption chain of which we are a part. How much are we increasing since April 1? It depends, because we are doing it in a transparent, periodically reviewable way. We have an energy surcharge on our prices. Our prices have been varying since April 1 depending on how gas and electricity markets or tariffs vary. We hope this normalizes, and we hope that therefore our energy surcharge will disappear at some point in the future. With the questionnaire, they work precisely for the normalization of this situation.

Well, all such measures are imminently, imperatively necessary and therefore welcome. However, in the specific case of Vidrala, which is fundamentally a consumer of gas and also electricity, but our most important energy resource is natural gas, this measure does not have as much effect. It must be remembered that the Iberian exception—again, welcome, I think it is good news—limits the price of gas for electricity production, not the price of gas for direct gas consumption. We are seeing other countries, again insisting that they are good news and good signs of something that needs to advance, but we are seeing other countries where more concrete, more forceful aid is being implemented to favor or reduce the price of natural gas itself, which is a critical resource for many industries, for industry more than electricity directly and more forcefully. For example, Italy, we are also seeing some favorable news in the United Kingdom, in countries where we have activity. There were previous measures in Portugal. The Iberian exception, to finish, is good news but does not directly affect natural gas, and certainly two are not enough.

Well, regarding risks that are now perhaps a bit on the public's lips, regarding risks of gas supply cuts, etc., I think those scenarios are unlikely. We have assessed them internally, we have our own contingency plans, but I want to think, if I'm not mistaken, that it is an unlikely scenario even in the face of a potential escalation of the conflict in Ukraine, mainly because the gas supply infrastructure in the regions where we operate—I repeat: the Iberian Peninsula, the United Kingdom, and Italy—is an infrastructure that allows alternatives, not only because of the regasification capacity that exists in the Iberian Peninsula and the UK, which accounts for 70% of the regasification capacity of the entire European continent, but also because of our direct and efficient connection to natural gas supply pipelines different from the pipeline that connects us to Russia, which connects to Europe. I am talking about the connection from North Africa, Algeria and Morocco, to the Iberian Peninsula; Italy has another very efficient and structural connection that exists in the North Sea for Norwegian gas to the United Kingdom.

Yes, yes, I think it is evident. Moreover, it is evident from the fact that we have low debt, well below one times EBITDA—a basic solvency ratio used in companies like ours—but also from how we reached that low level. We reached low levels from higher indebtedness after a process of acquisitions in 2015-2017 that transformed the business and diversified it, allowing it to grow better. Since then, as a good example of our financial discipline policy, we have managed to generate the cash we expected, and we have dedicated that will and internal decision to a majority part of the generated cash to deleveraging, to reducing debt. I think if one looks at the evolution of deleveraging, of debt reduction at Vidrala over the last three or four years, it is a good example of what our internal policy is regarding P&L and financial discipline.

First of all, the energy transition we are seeing is part of a transition towards sustainability. In that transition towards sustainability, the world of packaging for food products or consumer products has a lot to say, and glass naturally benefits. You just have to look at the dynamics that are occurring against plastic, and the alternative—a direct alternative to plastic—in my opinion, obviously I have a partial opinion, but in my opinion, the best is glass. Glass is a unique material, derived from natural sources, 100% recyclable an unlimited number of times. Let's say it is the definitive sustainable material, with an unlimited, eternal number of lives. But part of the transition, I said, in that part everything is nice. Within the transition towards sustainability, we also have the energy transition, and in that energy transition, what is happening is an accelerated process—in my opinion, too accelerated—in which many companies are being cornered into decarbonization and energy transition with foundations that were not well grounded and that have now been aggravated by the gas price crisis derived from an unforeseen event like the conflict in Ukraine, and that is causing all of us right now to accelerate our energy transition processes. Accelerating them to the maximum has its risks, but we have a work pattern with a specific decarbonization project that aims to reduce the consumption of fossil fuels in our production process progressively, because technology does not allow a sudden, abrupt change. To electrify or hybridize our process progressively—today it is very consumer of natural gas, but also much more consumer of electricity than it was in the past—so there is a pattern and a process of progress: being able to self-generate or be partially self-sufficient in this electrical consumption that we will progressively increase in this process of hybridization, electrification of our process through photovoltaic installations, all renewable energy in our facilities where there is solar resource, through wind power generation installations where there is wind resource, through recovery of the heat we lose in those extractions—an intense industrial production process—and through alternatives, all renewable energy alternatives that may prove efficient, even beyond electrical energy. Why not new worlds of energy transition that we are observing with great excitement, such as the world of hydrogen, the world of metal? We are seeing an energy revolution. We are very aware that within a sustainability revolution that is very favorable to glass as a packaging material, which in my opinion has a brighter future than ever, within that revolution there is an energy transition that we want to be part of because it will be good for our participants, for our society, simply it will also be good for the business. Not only an obligation, but that transition can be profitable precisely for shareholders. With this, at this moment when we are talking again about a situation that is not good for the market, the question arises: are you considering reducing the dividend until all this passes?

No, no, no. One can never say no because the future is not under our control. In the current circumstances, it is evident that the 50 cities or particularly have been—if you allow me to reuse the past perfect—have been particularly difficult in the first quarter, as you mentioned earlier with our first quarter results. In the current circumstances, Vidrala's dividend policy is based on an intention to maintain sustained and sustainable growth of the dividend year after year. We have been doing it for 16, 24, or 25—I almost lose count—consecutive years with a moderate but positive annual growth of the dividend. And this I say as a sign of what our DNA is: we have a prudent policy, just as we have a prudent financial discipline. And today there is no reason, thanks to that prudence, our financial solvency, and the stability and good future of our demand that we have mentioned a bit throughout this conversation, no reason to think that we have to sacrifice our dividend. Now, in the last few hours, we have experienced a certain earthquake in the market with the takeover bid that Siemens Energy is going to launch. It will leave a gap, they say, because it will be delisted. It will leave a gap in the IBEX 35. Every six months, the technical committee reviews the selective index. Vidrala looks, looks at the top of the Spanish market.

Well, things that are outside our control, we tend not to dedicate too much time to. And anything that comes in the future that shows that the company is better than in the past will be welcome. But our obligation—and here you will allow me a very political answer—our obligation is to attract or retain contracts for our shareholders and other participants, stakeholders as it is now said, and to invest in a very important moment of transformation in which our business finds itself. To have a company that is capable of carrying out its operations every day in a more sustainable and more profitable way, of course, and if possible, to take advantage of growth opportunities within a business base that, as we said before, is solvent, financially solvent. If from all this, from the achievement of all this, a larger company materializes and therefore falls within the parameters that I do not control and will not spend time controlling, such as belonging to larger stock indices, then it will be welcome, and certainly it will not be bad news.

Well, it is not my job, and besides, I think it would be very dangerous to enter into ratings of the stock price at specific moments, and even less now when it seems that financial markets and the stock prices of many listed companies are subject to greater volatility and uncertainty. What I can guarantee is that the future of Vidrala is demonstrably positive, that we understand and have under control the trends towards which the sector and the business are heading. A business that has demonstrated in the past a resistance or resilience—as it is fashionable to say now—evident against different economic cycles. We are not immune to all the symptoms of worsening in the economic context, but I invite you to contextualize them when talking about Vidrala and the economy within the framework of the natural resistance or stability of our demand. We are at a specific moment: buoyant from a demand point of view, uncertain from an economic point of view, particularly but temporary—that is the situation from the point of view of energy costs. But thinking about the future, we have no reason other than to be optimistic. The best is yet to come.

Well, we are faithful attendees of the Medcap Forum. We have been coming for many years. For a company with our capabilities, an industrial company, a company that does not primarily dedicate itself to serving the investor community but rather lets us do our business—which is to manufacture and sell glass containers and serve our customers, not our shareholders on a day-to-day basis—this event allows us to do things. It provides a forum for meeting with the investor community that, if we had to do on our own, would cost us time and be much more inefficient. We can only thank Bolsas y Mercados for continuing to hold this event year after year, because it makes things easier and cheaper for us.