The operator introduces the Amcor's First Half and Second Quarter 2024 Results Conference Call and welcomes the participants. Tracey Whitehead, Head of Investor Relations, and Ron Delia, Chief Executive Officer, will be discussing the company's results. Non-GAAP financial measures and forward-looking statements will be discussed, and participants are encouraged to limit themselves to one question and one follow-up during the Q&A session. Ron Delia thanks everyone for joining and will begin with prepared remarks before opening for questions.

Amcor's focus on safety has led to a 17% reduction in injuries and 70% of sites being injury-free for the past 12 months. Their reported earnings per share for the second quarter and first half were better than expected, thanks to improved working capital performance and cost control measures. They are on track to meet their full year guidance and expect earnings growth to improve in the second half of fiscal 2024. Volume trajectory has also improved, leading to confidence that the second quarter was the low point for volumes.

Amcor is confident in their long-term growth and value creation strategy, and believes their strong market positions and consistent capital allocation framework make them a compelling investment. Their financial results for the first half and December quarter showed a decline in organic sales and volumes, but their proactive cost actions helped mitigate the impact. Adjusted EBIT and EPS were both slightly above expectations, and working capital improvement drove strong free cash flow for the first half.

In the first half of the year, the company returned $390 million to shareholders through share repurchases and a growing dividend. Michael then provided further details on the financials and outlook. The Flexibles segment saw a decline in net sales and volumes, particularly in North America and Europe. However, there was some growth in Asia and Latin America. Adjusted EBIT was also lower, but the EBIT margin remained comparable to the previous year. This was due to lower volumes, but also cost-cutting measures and increased productivity.

In the December quarter, reported sales for the company were down 9% on a comparable constant currency basis, with volumes down 10% due to soft market and customer demand. The company responded by taking cost actions and focusing on operating efficiencies, resulting in a 5% decline in adjusted EBIT. In the Rigid Packaging segment, year-to-date net sales were 8% lower with volumes down 9%, mainly in North America. However, new business wins in Latin America partially offset this decline. Adjusted EBIT was also 9% lower than last year. In the December quarter, net sales were down 10%, with volumes down 12% due to lower volumes in North America.

In the second quarter, North American beverage volumes decreased by 19%, mainly due to destocking and softer consumer and customer demand. However, the company had some net new business wins in the hot fill category. Adjusted EBIT declined by 12% due to lower volumes, but was partly offset by cost management efforts. The company's financial profile remains solid with leverage at 3.4 times. The company expects leverage to decrease to 3 times by the end of the fiscal year and is reaffirming its full year guidance for adjusted EPS.

The company expects organic earnings growth in the low single-digit range, with additional benefits from share repurchases and favorable currency translation. However, this will be offset by the negative impacts of the sale of their Russian business, higher interest and tax expenses. The company anticipates a decline in volumes for the third quarter, but expects a return to growth in the fourth quarter. Adjusted free cash flow is expected to be higher than last year.

Amcor's plan to repurchase $70 million of their shares in 2024 remains unchanged, and they are actively pursuing M&A opportunities. CEO Ron Delia states that they are confident their earnings will improve in the second half of fiscal 2024 due to the elimination of earnings headwinds from the sale of their Russian business, a decrease in interest expense, and cost savings from structural changes. They have also taken proactive measures to align their cost structure with market changes, resulting in a reduction of over 2,000 employees in the past 12 months.

In the first half of fiscal 2024, the company has seen a significant decrease in operating costs, resulting in improved earnings leverage. The company is confident that the second quarter marks the low point for earnings growth and volume declines, and they expect their trajectory to improve for the rest of the year. They believe that multiple known factors will drive improved momentum in the second half of fiscal 2024, leading to mid-single-digit earnings growth in the fourth quarter. Beyond this fiscal year, the company is focused on creating value through strong earnings growth and a growing dividend, with multiple drivers of margin accretive growth and plans to increase CapEx and execute strategic M&A.

Amcor is expecting to see improved mix and stronger earnings as volumes normalize and improve. The company is taking proactive steps to optimize its cost base and is well-positioned to deliver strong earnings growth in the future. Despite six quarters of negative year-over-year volumes, Amcor remains committed to its longer-term growth and value creation strategy. As for the recent volume declines, the company has not seen any direct signs of increased promotional spending from its customers.

The speaker discusses the decline in their company's performance, stating that it was in line with their expectations except for a significant decline in December due to destocking. They also mention that January showed improvement and they expect the next two quarters to be better. The decline was mostly driven by market impacts and destocking, with developed markets being the weakest. The global healthcare and North American beverage sectors were the most affected.

The paragraph discusses the growth of certain categories in different regions, such as confectionery in North America and Europe and condiments and cheese and coffee in North America and Latin America. However, there is also talk of promotional activity and changing pricing strategies, but this has not yet had an impact on volume performance. Additionally, there has been a significant destocking in the healthcare industry, which has been a multiyear trend and has affected both medical device and pharmaceutical packaging globally. This is unexpected as healthcare has been a consistently strong business for a long time.

The company has faced supply constraints and raw material shortages in recent years, leading to customers stockpiling products. However, there has been a decline in demand and customers are now destocking, which is expected to continue in the near future. The company is focusing on cost savings to manage the declining volume and maintain margins.

The company has taken proactive measures to reduce costs in response to lower demand. They have already achieved $200 million in cost savings in the first half of the year and plan to continue this through the second half. They are also implementing structural cost reduction initiatives, such as plant closures, which are expected to result in a $35 million benefit in the second half and an additional $15 million in FY 2025.

The company has taken a structural approach to its cost-out agenda, with some savings being temporary and others being permanent. Procurement savings and operating cost savings are expected to be permanent, while the structural program will result in permanent cost savings. The flexing of the cost base will depend on volume, and the company has already taken steps to reduce labor costs. As volumes increase, the company will have to increase some costs, but it will do so in a managed and efficient manner. This will contribute to the company's long-term margin benefits. However, volumes came in lower than expected.

In this paragraph, Ron Delia discusses what gives him comfort in the guidance for the year. He mentions a couple of factors, including the expectation that destocking will abate as they work through the half, better January volume, and known benefits such as better operating leverage and momentum on the structural cost side. However, he notes that these improvements are not due to a dramatic improvement at the consumer level.

The speaker discusses the company's volume expectations and their impact on the balance sheet. They are confident in the cash flow trajectory and expect to be at approximately 3 times leverage by the end of June. Volumes are not expected to significantly affect this trajectory. The speaker also mentions the seasonality of lower cash flow in the first half and whether this will continue in the future.

The current leverage of the company is at 3.4 times due to the divestment of the Russia business and elevated working capital levels. The company has successfully reduced inventory by $500 million and is targeting a working capital to sales range of 8-9%. However, the company is still being impacted by lower payables and expects to see a further improvement of $200 million in cash flow. Overall, the company aims to bring leverage back to the 2.5-3 times range in the second half of the year.

The speaker discusses the current state of the company and its expectations for the future. They mention that the company is in a unique period of time, but they do expect improvement. The next question is about volume and the speaker discusses the challenges in the meat market and how they have seen some stabilization in certain regions. They also mention that they have seen some growth in Latin America. Overall, there are some positive signs for the company's future.

The speaker responds to a question about the company's aspirations to win share in the market. They mention a recent equipment purchase and their optimism about having the right consumables and technical support. They believe this will help them take share globally, although currently, the market dynamics are not in their favor. The speaker also discusses the company's business in Argentina, which has been impacted by economic challenges but is still functioning normally due to their localized approach.

The company's local business in Argentina has no exports and is focused on driving localization of key inputs and pricing ahead of inflation. Cost management is also a priority due to expected slowing demand. The accounting for Argentina's hyperinflation economy has been consistent, with a 55% devaluation in December resulting in a $34 million impact on monetary assets. In terms of the Rigid Packaging business, there were significant volume declines in the December quarter, particularly in hot fill, and the company is evaluating its strategic position.

Ron Delia explains that the company has experienced a decline in volumes due to market impacts and destocking. The decline in volumes is attributed to lower consumer demand and customers reducing inventory. This is a significant impact on the North American beverage business, particularly in the hot fill segment. The company still believes in the business despite these challenges.

The business is well-positioned in its market with world-leading technology and a reasonably optimized footprint. It has a beverage business in North America, but also has a growing specialty container business and a strong presence in Latin America. January saw an improvement in volumes compared to December, but it is not a good indicator for the rest of the quarter due to factors such as delayed orders from Costco.

The speaker responds to a question about whether they are being overly optimistic based on one month of data. They acknowledge that January showed improvement, but caution that they are still expecting continued declines in certain areas of their business due to destocking and consumer behavior. They clarify that the January improvement is relative to the weak performance in the first half and December. They also mention that there are other factors that will support their growth assumptions for the rest of the fiscal year.

The company expects the year-end destocking to not repeat outside of healthcare and North American beverage. They also expect a reduction in volume challenges in the fourth quarter due to an easier comparative period. The net interest guidance has been lowered due to movements in forward curves and potential interest rate reductions. The tax rate is currently under 19% and the company is benefiting from lower corporate tax rates in certain jurisdictions.

The company operates in various countries and the tax rate can vary due to earnings, country mix, and business performance. The balance sheet and leverage are important factors in considering share buybacks, which have been a significant part of the company's EPS growth strategy. The company has bought back $1.2 billion in shares and invested $200 million in acquisitions over the past three years. The company aims to maintain a leverage range of 2.5 to 3 times.

The speaker discusses the company's comfort with being above the industry average and their focus on evaluating capital management and buyback opportunities in conjunction with M&A opportunities. They also address the company's protein packaging business, acknowledging the challenge of competing with larger players due to the lack of installed base and the importance of film as the primary basis of competition.

The company is focused on growing its film business by offering a full-service solution to customers. They have aspirations to grow the business at a mid- to high single-digit rate with good margins. The second half EPS guidance remains the same, with volumes and EPS expected to be down in Q3 and improve in Q4. Q4 is the company's biggest quarter and they expect mid-single-digit EPS growth.

The company's volume trajectory has been softer than expected due to destocking in healthcare and North America beverage, but they are offsetting it with cost-cutting measures. Their guidance remains unchanged and they are confident in the underlying performance of the business. The consumer environment is still generally weak with low single-digit declines in scanner data and evidence of down-trading in certain categories. Some categories, like pet food and coffee, may see shifts in formats performing better.

The speaker discusses the trend of destocking in various product categories, noting that it was particularly pronounced at the end of the year in December but is not expected to continue. They mention that healthcare and North American beverage will likely continue to experience destocking, but in other segments, they expect to see a bounce back and the end of the current inventory cycle. They also mention some signs of this already happening.

The speaker discusses how they determine the difference between destocking and underlying consumer weakness. They rely on discussions with customers and data, such as scanner data for categories where it is available. They also look at scanner results for individual customers to compare to the overall market performance.

The speaker discusses how they use data to determine the difference between sell-through and inventory levels. They also mention that there has been an improvement in January compared to the first half of the year, but not necessarily overall growth. They express optimism for the second half of the year and thank the audience for their interest.

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