The Amcor First Quarter 2024 Results Conference has begun with the operator introducing Tracey Whitehead, Head of Investor Relations, who will be leading the call. The press release and presentation can be found on the company's website and non-GAAP financial measures will be discussed. The CEO and CFO will be providing prepared remarks before opening up for questions. Amcor is known for its strong safety record, with a decreasing trend in recordable case frequency rate over the years.

Amcor's first quarter results were in line with expectations despite a challenging demand environment. The company remains focused on safety and is on track to meet its full-year guidance. The second half of the fiscal year is expected to be stronger due to various factors. Amcor is also making progress in its sustainability efforts and is confident in its long-term growth strategy.

Amcor's market positions, execution capabilities, and consistent capital allocation framework make it a strong investment opportunity. In the September quarter, the company's financial performance was in line with expectations, with sales 6% lower than last year due to price and volume declines. Adjusted EBIT was 5% lower, but the company drove working capital improvements and expects to deliver strong cash returns to shareholders. The board has increased the dividend to $0.125 per share. Michael will provide further details on the financials and outlook.

In the flexible segment, net sales were down 8% on a reported basis, but down 6% on a comparable constant currency basis. This was due to lower volumes, partially offset by price mixed benefits. First quarter volume trends were similar to last quarter, with all regions experiencing lower consumer demand and destocking. In the rigid packaging segment, net sales were 6% lower than last year, with price mixed benefits offset by declining volumes.

In North America, volumes in the beverage and specialty containers business were impacted by lower consumer demand and custom destocking. In Latin America, overall volumes were up due to new business wins, with strong growth in Brazil and Colombia offsetting lower volumes in Mexico. Adjusted EBIT was 6% lower than last year, but cash flow improved significantly compared to the first quarter of fiscal 2023. The company remains focused on reducing inventory and returning cash to shareholders through share repurchases.

Amcor maintains a strong investment grade credit rating and expects to decrease leverage by the end of the fourth quarter. They are reaffirming their full-year guidance for adjusted EPS and expect organic earnings growth in the low single-digit range. The strengthening US dollar and sale of plants in Russia will have a positive and negative impact, respectively, on currency translation. Interest and tax expense expectations remain unchanged. Amcor expects significant adjusted free cash flow and plans to repurchase shares and pursue M&A opportunities. They have a history of strong and consistent long-term earnings growth.

In this paragraph, the speaker discusses the company's expectations for fiscal 2024, noting that there may be challenges in the near term resulting in volume declines and higher interest expenses. However, they anticipate a return to mid-single digit earnings growth in the second half of fiscal 2024 and a resumption of their long-term trend of high single digit earnings growth. This is supported by factors such as cost-saving initiatives, increased earnings leverage, and normalized customer inventories. The speaker also mentions that a significant change in the demand environment is not necessary for solid earnings growth in the second half and beyond.

The speaker discusses the building blocks that contribute to the company's long-term growth, including opportunities in priority categories, emerging markets, and innovation. They also mention their upcoming sustainability report, which highlights their progress in product development and operational sustainability. The company has made significant strides in reducing greenhouse gas emissions and has committed to achieving net-zero emissions by 2050. They also have targets for reducing water and waste.

Amcor has made significant progress in implementing sustainable practices, with 100% of their sites having a water management plan and 143 sites achieving zero waste to disposal certification. They are also focused on developing circular systems for responsible packaging, with their industry-leading innovation capabilities allowing them to create more sustainable and high-performing packaging. Currently, 89% of their flexible packaging portfolio is designed to be recycled or has a recyclable-ready alternative, and they have also increased their use of recycled content by 29%. Amcor is committed to achieving 30% recycled content across their portfolio by 2030 and is using their position as an industry leader to help their customers with their sustainability efforts.

In fiscal '23, Amcor hosted webinars for customers on topics such as recycled content and regional regulations. They are focused on sustainability and anticipate growth opportunities in the future. In Q1 of fiscal '24, they saw a decline in volumes and expect a similar trend for Q2, in line with their expectations. They are reaffirming their earnings and cash flow guidance and remain focused on their long-term growth and value creation strategy.

The company expects the second half of the year to show improvement in terms of destocking and volume, with a moderate impact on inventory reductions. They anticipate the trajectory to improve and for volumes to be flat or slightly higher. They also note that mix is an important factor in their earnings leverage, but they expect it to be neutral for the full year as some higher value segments have declined at a slower rate than lower value categories.

The company expects the healthcare destocking to continue in the second quarter, but ultimately balance out in the second half. This will have a neutral impact on fiscal '24 earnings, but mix will be an important factor in the earnings algorithm going forward. In terms of inventory reduction, the company is seeing a trend of companies trying to drive inventories down to lower levels, especially as consumer demand has softened and carrying costs have increased. This trend is expected to continue into the second quarter as companies focus on cash flow at yearend.

Ron Delia, CEO of Amcor, discusses the progress of the company's new packaging products, including AmLite, AmFiber, and AmSky. While it is still early days, some of these products are already generating significant sales. Delia attributes the company's ability to maintain profit growth despite declining volumes to aggressive cost-cutting measures.

The company has been taking cost-saving measures and has seen improved earnings leverage and the ability to flex costs. They have seen a reduction in costs and headcount and have been able to cut overheads. In the first quarter, they took out $70 million of costs. The company is waiting for customers to begin promoting more aggressively, but they are also pushing for innovative new products with higher price points. It is unclear who is winning the tug of war between promotions and new products.

The speaker discusses how price has been a major driver of revenue growth for consumer companies, but there is a hope that volumes will also increase over time. However, the business is not relying on this to happen. They also mention their momentum in the protein packaging market, but it is still early in their journey. Despite picking up some business, the overall meat sales have been weak in the first quarter. The speaker emphasizes that this is a long-term game and they are still in the early stages.

The speaker expresses confidence in the company's value proposition and recent acquisition. They also address concerns about the company's balance sheet, stating that net debt and leverage are in line with expectations but may see temporary impacts in the second half due to seasonal cash flows and lapping of earnings from Russia. However, they expect these to improve with the benefit of restructuring and normalization of working capital levels.

The company has made progress in streamlining their portfolio and cutting costs, but when volumes improve, they may invest in new plants and increase headcount.

Ron Delia, CEO of a company, is confident that their current production capacity can handle an increase in volume without any additional investment. They have taken cost reduction measures, such as reducing headcount and optimizing overhead, to improve their leverage and expect to see benefits from restructuring initiatives in the second half of the year. These initiatives will result in long-lasting and sustainable cost savings. An analyst from Jefferies asked a question about this and Ron Delia responded positively.

The interviewer asks Ron about the current state of the US protein market and how it relates to comments made by others in the industry about overcapacity and price pressure. Ron believes that the competition and pricing pressure in the market is not any more intense than it has been in the past. He also mentions that the assets used in this market are versatile and can be used for other categories as well. When asked about price trends in different categories, Ron believes that it will depend on inflation and the industry has historically compensated for inflationary cost pressures rather than having positive pricing without value.

Cameron McDonald asks a question about the projected high single digit growth rate in the long term. Ron Delia explains that the company's formula for growth, which includes volume growth, improved mix, and excess cash for acquisitions or share repurchases, gives them confidence in achieving this growth rate despite external factors such as interest rates and previous acquisitions.

The company has been delivering 8% earnings growth over the past decade and expects to continue this trend in the future. They have been actively involved in M&A deals, but will primarily focus on smaller, bolt-on acquisitions. The company is committed to maintaining an investment-grade balance sheet and will prioritize deleveraging in their allocation of excess free cash flows.

Mike responds to Ron's point about the company's earnings and cash flow growing. He mentions that CapEx will also increase in order to drive organic growth and invest in M&A. The company plans to maintain leverage in a certain range and deploy excess cash in a strategic manner. John Purtell asks about the potential impact of BOP1 on food consumption and packaging demand, but Mike states that they have not seen any impact yet. He also mentions that there are still many unknowns regarding the rate of adoption and overall impact of these drugs.

The food and beverage industry has a history of successfully adapting to changing consumer needs through innovation and adjusting product portfolios. There is potential for packaging intensity to increase as portion sizes decrease. The reconciliation between reported and adjusted earnings shows that hyperinflation and Russia-Ukraine costs were higher, mainly due to the restructuring program.

The company expects to continue experiencing restructuring costs throughout the year, which will result in $50 million in EBIT benefits. There was a devaluation in Argentina, but the impact seems to have eased. The CEO mentioned that destocking in the healthcare segment is likely to continue in the second half of the year due to supply constraints and raw material shortages in the past.

The speaker discusses the company's progress in meeting customer demand and reducing inventory. They also address their efforts to design packaging that is recyclable, with a goal of reaching 100% recyclability by 2025. They acknowledge that some complex materials may take longer to achieve this goal, but they remain committed to making progress in this area.

During the earnings call, a question was asked about the temporary savings of $200 million last year and $70 million so far this year. The speaker was asked to estimate how much of this would be temporary and how much would be permanent. They were also asked about their expectations for earnings and EBITDA in the second quarter. The speaker confirmed that Q2 would be similar to Q1 and that most of the cost reduction came from operational costs. They also mentioned that some costs would stay out of the business even as volumes return. The call concluded with the speaker's closing remarks.

Ron Delia is thanking everyone for participating in the conference call and their interest in Amcor. He also thanks the operator and announces the end of the call.

This summary was generated with AI and may contain some inaccuracies.