In the paragraph, the Amcor Fiscal 2025 Third Quarter Results Conference is introduced by the operator, and Tracey Whitehead, Head of Investor Relations, explains the agenda for the call. Participants include Peter Konieczny, Interim CEO, and Michael Casamento, CFO. Tracey highlights the availability of the press release and presentation on Amcor's website and notes that the call will cover non-GAAP financial measures and forward-looking statements. Peter Konieczny announces the successful early completion of a transformational merger with Berry Global, which positions Amcor to accelerate earnings growth through identified synergies, and he thanks the teams involved for their efforts.

The paragraph discusses Amcor's achievements and future plans following a successful combination with Berry. The company emphasizes its commitment to safety, reporting a low incident rate and many injury-free sites. Amcor highlights continued EPS growth despite market uncertainties, particularly in North America. The Berry combination was completed faster than expected, leading to updated earnings and cash flow guidance. The company is optimistic about the synergies from this integration, which are expected to enhance earnings by approximately 12% as they enter fiscal 2026. The focus is on realizing synergies and accelerating growth.

The paragraph discusses the benefits and strategic alignment following a recent acquisition within Amcor, emphasizing the importance of clear accountability and leadership from the start. It highlights that Amcor's business is organized into two segments led by experienced leaders Fred Stephan for Global Flexible and Jean-Marc Galvez for Global Containers and Closures. The new combination enhances Amcor's talent pool, supports cost and growth synergies, and aligns with the strategy to become the preferred packaging partner, promoting sustainable growth and improved margins. Amcor aims to focus on high-value, fast-growing markets, leveraging its expanded capabilities in material science and innovation to drive growth and enhance its portfolio.

The paragraph discusses Amcor's strategy to optimize and redirect its R&D spending to address complex functionality and sustainability challenges, creating significant near- and long-term value for shareholders. It outlines a plan to achieve $650 million in synergies over three years, boosting earnings growth. The synergies will significantly benefit fiscal years 2026 to 2028, with total EPS accretion over 35%. Additionally, Amcor anticipates a $280 million one-time cash benefit from working capital improvements. By fiscal 2028, annual cash flow is expected to exceed $3 billion, enabling strong balance sheet maintenance, organic growth, M&A financing, and dividend growth. This strategy positions Amcor for increased long-term EPS growth amid macroeconomic uncertainties.

In the third quarter financial results, overall volumes were similar to the previous year, with growth in Europe, Asia-Pacific, and Latin America offset by weaker demand in North America. Net sales reached $3.3 billion, and EBIT was $384 million, both slightly higher than last year. Adjusted EPS grew by 5% due to cost management and improved healthcare volumes. The Flexible segment saw a 1% volume increase, with notable gains in healthcare and protein but offset by weak North American demand. Despite challenges, solid demand persisted in Europe, Asia, and Latin America, while North American demand became more uncertain, impacting categories like snacks, confectionery, and personal care.

The paragraph discusses the company's performance across various markets. Priority markets like pet care, premium coffee, and ready meals showed strong growth, with meat, dairy, and liquids also seeing mid-single-digit volume increases partly due to modest share gains. Healthcare and medical volumes improved significantly, especially in pharmaceutical packaging following the end of destocking. This growth offset declines in snacks, confectionery, home, and personal care markets. Overall, net sales increased by 1% on a constant currency basis, and adjusted EBIT rose by 2% to $358 million, maintaining a strong margin of 13.7%. However, the Rigid Packaging segment faced challenges, with sales down 3% due to decreased demand in North American Beverages, despite growth in Latin America and specialty containers. Consumer demand weakened more than expected, causing high single-digit volume declines in North American Beverages, though Latin America and specialty containers saw growth.

In the recent quarter, the company's adjusted EBIT was $55 million, no longer benefiting from the Bericap Joint Venture, which contributed $5 million the previous year but was sold in December 2024. EBIT was negatively affected by lower volumes and price mix challenges, though partially offset by better cost management despite increased labor costs in North America. Typical seasonal increases in staffing impacted earnings due to lower-than-expected volumes. On the cash flow side, there was a net cash outflow of $17 million year-to-date, compared to a $115 million inflow last year, primarily due to higher inventories linked to weaker sales. The company is prioritizing inventory reduction to meet demand expectations. Leverage was higher than anticipated at 3.5 times, influenced by stronger euro rates and higher net debt but is expected to decrease to 3.4 times by the end of fiscal 2025 and 3 times by the end of fiscal 2026, aligning with their merger expectations.

The paragraph outlines the financial performance and outlook of a company following the refinancing of Berry Global debt and an early merger close. The company returned $550 million to shareholders through dividends and declared a higher dividend for the March quarter. Despite expecting muted Q4 volume growth due to macroeconomic uncertainties and demand conditions, the company anticipates meeting its earnings guidance for fiscal 2025. It projects an adjusted EPS of $0.72 to $0.74 per share for the final quarter, considering the merger's effects. The expected free cash flow for the year ranges from $900 million to $1 billion, including contributions from Berry. For fiscal 2026, the company anticipates a 12% EPS growth from $260 million in synergies, independent of economic and demand improvements.

The paragraph discusses Amcor's future, expressing optimism about delivering value to shareholders despite an uncertain environment, and announces their readiness for questions. Ghansham Panjabi from Baird congratulates Amcor on closing a merger and inquires about the slowing North American volumes, noting previous low points due to destocking and consumer issues. Peter Konieczny responds by stating that they expected low-to-mid single-digit volume growth overall but experienced a shortfall in North America, which was the main area of concern.

The paragraph discusses the challenges faced by a North American company in its beverage and flexible products businesses due to weak consumer demand and inflation, particularly in cocoa. Despite growth in some categories like healthcare and meat, overall performance in North America was weaker than expected. The company notes that previous issues with destocking have been resolved, but consumer demand remains soft due to persistent inflation and uncertainty around tariffs. The paragraph concludes with a question from Citi's Anthony Pettinari about the company's assumption of a 20% synergy-driven EPS growth for fiscal 2026, querying whether this assumes positive organic growth.

In the paragraph, Peter Konieczny addresses a question about achieving synergies in a challenging macroeconomic environment for fiscal 2026. Before answering, he clarifies an earlier question about Berry's volume performance, stating that it's too early to have all the details since they just closed the acquisition, but expresses optimism about growth in Berry's mix. Shifting focus, Konieczny explains that they provide guidance only through the fiscal year's end, including Q4, and that they anticipate a similar macroeconomic environment in the near term. He notes stable volume growth for Amcor and slight growth for Berry, predicting overall flat to slightly increased volume performance for Q4.

The paragraph discusses the company's strategic planning for the fourth quarter and its positive outlook for 2026 following a successful acquisition of Berry. The acquisition has been completed faster than expected, allowing the company to focus on synergies expected to generate $260 million in fiscal 2026, resulting in a 12% EPS increase. The company has high confidence in achieving these synergies, independent of macroeconomic conditions or market demand, due to internal efforts and dedicated teams across various functions, including SG&A, procurement, operations, and growth. The conversation shifts with a question from Daniel Kang regarding the specific breakdown of the anticipated synergies, particularly in procurement, and inquiries about preliminary discussions with raw material suppliers.

In the paragraph, Michael Casamento explains the expected progression and sources of the $260 million synergies following an acquisition. Initially, synergies will be realized through SG&A, followed by procurement within the first 12 months, then extended to operations which involves footprint optimization. He notes that growth synergies typically take longer to achieve. Peter Konieczny adds that while they haven't provided a detailed breakdown for the first year, procurement is expected to be a significant contributor. Discussions with suppliers have been limited, as they usually wait for the acquisition to be finalized before engaging in detailed conversations.

The paragraph discusses the progress of the merger between two companies and the ongoing portfolio review. Peter Konieczny acknowledges the dynamic portfolio management opportunities post-merger, especially with the combined capabilities of the new entity. The company has initiated an analysis of their activities to determine their strengths and potential improvements. Konieczny highlights the significant synergy opportunities and mentions that the combined best practices may influence the assessment of different businesses and their competitiveness.

In the paragraph, the discussion revolves around the timing and approach to achieving procurement synergies following a merger. The speaker acknowledges the challenge in specifying an exact timeline due to the constantly changing environment but emphasizes the need for discipline in the process. Jakob Cakarnis from Jarden Australia inquires about the priorities for 2026 and beyond in terms of supplier negotiations, aiming for harmonized terms and pricing benefits due to the combined entity's larger scale. Peter Konieczny responds by explaining that swift action on synergies is crucial, particularly in procurement, once the combined entity's spend can be represented to suppliers.

The paragraph discusses the impact of an acquisition on business operations and growth. It highlights that conversations with suppliers will now proceed, covering various aspects such as price and terms. The total addressable spend for the combined entity is approximately $13 billion, with $10 billion allocated to raw materials. A 2.5% to 3% impact is expected from procurement synergies, equating to 1% a year, which is deemed achievable. George Staphos from Bank of America asks how volatility, particularly regarding tariffs, affects customer outlook on demand for staple items like confectionery, protein, and coffee. The question emphasizes the need to consider growth as it significantly influences the company's valuation.

The paragraph discusses the impact of economic uncertainty on consumer behavior and how it affects a company's synergy targets and growth potential. Peter Konieczny addresses a question about customer performance and demand, noting that weakening consumer demand in North America is driven by uncertainty. Consumers are altering their spending habits, seeking value by trading down, buying in bulk, and choosing different channels. This behavior affects the company's ability to meet synergy targets, especially with current slow volume growth. The focus is on understanding customer behavior to navigate these challenges.

The paragraph discusses the challenges faced by a company due to demand forecast uncertainties and market volatility. Customers provide volume forecasts that sometimes do not materialize, impacting the value chain. The speaker then shifts to discussing synergies, specifically a target of $650 million over three years, and notes that they have pipelines in place to pursue these opportunities. While there could be more opportunities than initially expected, they are cautious about setting different expectations. The paragraph concludes by highlighting the broader uncertainty in the market, particularly in North America, due to tariff-related volatility.

In the paragraph, Brook Campbell-Crawford asks about the decline in volume of the North America beverage business, noting that it's down by high single digits and questioning if there are structural issues within the business. Peter Konieczny responds by explaining that the decline aligns with market trends and is not due to a loss of market share. He mentions that the performance in volume is consistent with market data and customer exposure. He then defers to Michael for insights on how this affects the bottom line and acknowledges the question about potential structural issues.

The paragraph discusses a company's business performance, noting the impact of previous business cycles and current challenges. Michael Casamento highlights a decline in EBIT, partly due to the disposal of the Bericap business in December 2024, which contributed $5 million to the EBIT in the prior year. There was also a 12% decrease in the Rigid business's performance on a constant currency basis, mainly due to a volume decline in North American Beverage. Additionally, increased labor costs in anticipation of a busy June quarter were not offset by expected volumes, impacting the company's cost base and resulting in a year-on-year decline. The company expects improvement in the subsequent quarter. The operator then opens the floor to a question from John Purtell of Macquarie Group.

In the paragraph, Peter Konieczny discusses the weakening consumer demand observed throughout the quarter, particularly in North America, while highlighting a solid demand in other regions with expectations of low-to-mid single-digit growth. He mentions that Amcor expects overall flat volumes as they move into the fourth quarter, similar to the third quarter, but notes Berry experienced some growth in the third quarter. He anticipates a flat to slightly growing fourth quarter. Mike Roxland from Truist Securities then questions about procurement savings related to a deal, noting that both Amcor and Berry, who have recently closed a deal, are significant global purchasers of resins, though there may not be a direct overlap in some grades.

The paragraph discusses the procurement strategy and anticipated synergies in a challenging resin market. It highlights that although there is some overlap in polyethylene, Berry is stronger in polypropylene while Amcor excels in PET and PE. This complementary strength allows for potential harmonization in procurement terms. Peter Konieczny mentions that the combined raw materials spend for the companies is $10 billion, with expected synergies of about 3% over three years. This is viewed as a reasonable expectation rather than a significant one. The resin producers are facing financial difficulties, making them reluctant to offer price concessions. The vetting process for cost synergies is also touched upon, but not in detail, suggesting that the focus is on aligning terms with a larger buyer.

The paragraph discusses the strategic approach and confidence in generating synergies in a challenging business environment. A large buyer's ability to bring critical volumes to the supply base is seen as advantageous. The speaker emphasizes having multiple supplier alternatives to leverage opportunities. Michael Casamento responds to a question about synergy calculations from a merger, mentioning extensive work by both Berry and Amcor, including using external consultants for benchmarking. The cost synergy target is around 5% of sales, totaling $530 million, with additional growth and financial synergies of $60 million each. The team feels confident in achieving these figures. The operator then introduces the next question from Keith Chau of MST Financial.

In the paragraph, a discussion takes place regarding procurement synergies for Amcor, which aims to achieve a 3% savings over three years. Despite this seemingly modest saving, it could significantly impact suppliers whose EBIT margins are around 10% to 15%, potentially reducing them by 300 basis points. The discussion raises concerns about the company’s relationship with suppliers, referencing a directive for suppliers to meet in Chicago, which might appear more like an order than a partnership. Questions are posed about supplier attendance, the repercussions for non-compliance, and the possibility of alternative sourcing. However, Peter Konieczny emphasizes the sensitivity of such discussions and refrains from divulging details, asking for understanding due to the strategic nature of these supplier interactions.

In the paragraph, Nathan Reilly from UBS inquires about how a company's merged Flexible portfolio is adapting to North American consumers' value-seeking behaviors, such as shifting towards private labels and smaller portion sizes. Peter Konieczny responds by noting that consumers might prefer non-branded product alternatives, and the company is well-represented in the private label category in North America. He emphasizes that packaging formats for branded and private label products are quite similar, and the company is focused on expanding participation in areas where consumers are likely to turn. The next question comes from Samuel Seow of Citi, who asks about the net exposure of North American Beverage in the merged business and whether they plan on pruning Berry businesses, Amcor segments, or both.

The paragraph discusses the financial implications of the integration between Amcor and Berry. Peter Konieczny clarifies that the integration is about combining the companies' portfolios, not carving out legacy businesses. He states that Berry's Containers and Closures business does not operate in the North American Beverage category, which is an area mainly involving Amcor's legacy business, with $1.5 billion in revenue. Michael Casamento provides further clarification on the financials, noting that early integration costs have amounted to $26 million below the line, which is part of the $280 million costs anticipated for FY 2026 and beyond. He also mentions that transaction costs, estimated to be 1.5% to 2% of the enterprise value, totaling $250-$300 million, are split between the companies, with $36 million recorded to date, including $28-$30 million as transaction costs.

The paragraph discusses expectations and strategies related to a merger. It mentions upcoming cash costs and synergy achievements totaling $280 million and involves addressing legal, consultancy, and financing fees. Arun Viswanathan from RBC Capital Markets inquires about growth and procurement strategies post-merger, noting Berry's previous low single-digit volume growth. Peter Konieczny responds, indicating the new company aims to improve growth sustainably by leveraging portfolio realignment and pruning, confirming synergy targets beyond just price, such as long-term supply agreements.

The paragraph discusses the company's strategy and priorities following a merger. It highlights four main areas for growth: a broad global product portfolio, leveraging product opportunities in existing markets like Latin America and Asia-Pacific, innovation capabilities focusing on functionality and sustainability, and strategic procurement advantages due to the merger, which can lead to better terms and long-term supplier relationships. The speaker emphasizes the importance of these levers for growth and thanks participants for their interest in the call, concluding with an acknowledgment of the completed merger.

The paragraph describes Amcor's strong position to meet evolving market demands and expresses enthusiasm for new colleagues, customers, and shareholders. It marks the beginning of an exciting future for the company and concludes the conference call.

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