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  Title	Amcor : 2Q25 Transcript - FINAL
  ID	6591279
  External ID	7524448136
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  Published Date	Feb. 5, 2025, 1:24 a.m.
  Summary	Amcor Fiscal 2025 Second Quarter and Half Year Results 8am ET February, 4 / 12am AEDT February 5, 2025 Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 TOTAL PAGES: 22 CORPORA
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  URL	https://www.marketscreener.com/quote/stock/amcor-plc-59660055/news/amcor-2q25-transcript-final-48961760/
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  Content ID	4082449
  Key	b77fe36e-10ce-46c3-9d47-548a6185e8b4
  Content	Amcor Fiscal 2025 Second Quarter and Half Year Results 8am ET February, 4 / 12am AEDT February 5, 2025 Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 TOTAL PAGES: 22 CORPORATE SPEAKERS: Tracey Whitehead Amcor plc; Head of Investor Relations Peter Konieczny Amcor plc; Chief Executive Officer Michael Casamento Amcor plc; Chief Financial Officer CORPORATE SPEAKERS: Anthony Pettinari Citi; Analyst Keith Chau MST Marquee; Analyst George Staphos Bank of America; Analyst Daniel Kang CLSA; Analyst Matthew Krueger Baird; Analyst Jakob Cakarnis Jarden; Analyst Michael Roxland Truist Securities; Analyst John Purtell Macquarie; Analyst Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 PRESENTATION: Operator Thank you for standing by. (Operator Instructions) At this time, I would like to welcome everyone to the Amcor Half Year Results 2025. (Operator Instructions) I would now like to turn the call over to Tracey Whitehead, Head of Investor Relations. Please go ahead. Tracey Whitehead Thank you, Kate. Thank you, everyone, for joining Amcor's fiscal 2025 second quarter earnings call. Joining today is Peter Konieczny, Chief Executive Officer; and Michael Casamento, Chief Financial Officer. Before I hand over, let me note a few items. On our website, amcor.com, under the Investors section, you'll find today's press release and presentation, which we'll discuss on this call. Please be aware that we will also discuss non-GAAP financial measures and related reconciliations can be found in the press release and the presentation. Remarks will also include forward-looking statements that are based on management's current views and assumptions. The second and third slides in today's presentation lists several factors that could cause future results to be different than current estimates. Reference can be made to Amcor's SEC filings including our statements on Form 10-K and 10- Q for further details. With that, over to you, P.K. Peter Konieczny Thank you, Tracey. Thank you to all who have joined us for today's call. Amcor had a very active second quarter, and we're progressing well on three clear priorities: one, deliver on the base business; two, complete the work required to close the announced merger with Berry Global; and three, make sure we are well prepared for a fast start and integration. With the base business, we start as always with safety on slide 4. Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 I'm incredibly proud of the commitment our teams demonstrate to safety every day. The safety and well-being of our people will always be our top priority, and we're constantly looking for opportunities to improve. In fiscal 2025 to date, we have continued to deliver outstanding results. We achieved an industry-leading total recordable incident rate of 0.30 and 79% of our sites remained injury-free for more than a year. Our key messages for today are on slide 5. Q2 results were in line with expectations we set in October as we continued to execute and deliver across key financial metrics. We are pleased to report our fourth consecutive quarter of sequential volume improvement and a return to sales growth, albeit marginal. Margins also continue to improve, helping drive a 5% increase in both adjusted EBIT and EPS on a comparable basis. This solid performance, along with our confidence in the second half leaves us on track to deliver against our full year guidance, which we are reaffirming again today. Finally, as we continue to execute well on the underlying business, we're also highly focused on the unique opportunity we have to accelerate growth and enhance earnings and cash generation through the previously announced combination with Berry. Turning to Slide 6. On our Q1 earnings call in October, I outlined my strategy for Amcor to deliver consistent, sustainable organic growth in the low to mid-single-digit range through an unwavering focus on our customers, on sustainability and on our portfolio mix. I also shared my future vision for Amcor to become the global packaging partner of choice. The merger with Berry is directly aligned with this strategy and moves us further towards our vision. Slide 7 highlights the compelling rationale behind this combination. One of the most powerful and transformational long-term benefits of this merger is the opportunity to drive stronger, more consistent and sustainable volume-driven organic growth and to further improve margins. There are a number of growth opportunities that will become available with two of the most significant shown on this slide. First, the combined company will be a better business with a broader primary packaging portfolio at scale across consumer goods and healthcare end markets. Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 In the context of a stronger, larger scale company, Amcor will be uniquely positioned to further refine and prune our portfolio mix to focus even more on attractive higher-value, faster-growing end markets. This journey is already underway with Berry's recent divestitures of its HHNF and tapes businesses, which have significantly enhanced their product mix while reducing cyclicality. As a result of further pruning, we will increase average growth rates, margins and cash generation across the remaining portfolio. Second, this combination creates exceptional capabilities, material science and innovation. We will drive growth for innovation and more sustainable packaging solutions by effectively and efficiently leveraging our combined resources, bringing together more than 1,500 R&D professionals. An annual R&D investment of $180 million will allow us to optimize and redirect R&D spend, providing capacity to focus on solving the most complex functionality and sustainability challenges faced by our customers and consumers. Accelerated growth, combined with significant synergies means this combination will drive compelling near- and long-term value for our shareholders. Moving to slide 8. You've seen this slide before but let me recap a few of the drivers behind the significant and sustainable financial value we're creating. We continue to pressure test our assumptions and are confident in the $650 million in total cost growth and financial synergies we've identified and will deliver. We expect to realize 40% or $260 million of total synergies in the first year and the full run rate in year three with an additional $280 million of onetime cash benefits from working capital improvements, which will fund cash costs to achieve synergies. Including synergies, this combination is expected to deliver significant cash EPS accretion of over 35% and annual cash flow in excess of $3 billion. This will allow us to maintain a strong investment-grade balance sheet and deploy additional cash to invest in organic growth and M&A. We expect to increase long-term EPS growth and take the outcomes under our shareholder value creation model to a new and higher level. Turning to slide 8 and an update on the steps we have taken towards closing. We are moving very quickly from a process perspective to complete the work required to bring the merger to close. Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 On January 23, we filed the definitive joint proxy statement prospectus with the SEC, and shareholder meetings are scheduled to take place on February 25th. Initial materials required to secure regulatory approvals across nearly all required jurisdictions have been submitted, and the first approvals have been received. The composition of the Board of Directors has been finalized and our path to completion is well advanced. From an integration preparedness perspective, we're also well positioned. We are focused on building our teams, filling key roles ensuring we will make a fast start upon close with clearly defined plans for the first 100 days, in line with our proven integration playbook. We have a strong track record of successfully executing on large transactions, and our teams have significant experience in integrating sizable businesses. Moving to Slide 10 for a summary of our financial results. As noted earlier, delivering on the base business is a top priority, and we continue to execute both with second quarter results in line with the expectations we outlined in October. Our differentiated value proposition resonates with customers, supporting a return to overall sales growth in Q2 as net sales of $3.2 billion were slightly ahead of last year. Overall volumes grew by 2.3%, improving on the first quarter and offsetting an unfavorable impact of price/mix. This was the fourth consecutive quarter of sequential improvement in volumes. As expected, destocking continued in healthcare and demand remained soft in the North American beverage business, impacting mix and unfavorably impacting overall volumes by more than 1%. Across the balance of the business, overall volume growth was consistent with the first quarter up approximately 4%. Improving volume trends and continued proactive cost and productivity actions more than offset unfavorable price/mix headwinds, leading to another quarter of solid earnings growth. Adjusted EBIT increased by 5% compared with last year, and adjusted EBIT margin expanded year-over-year by 40 basis points. Adjusted earnings per share of 16.1 cents also grew by 5% on a comparable basis, and cash generation was above the prior year, positioning us to reaffirm our fiscal year guidance. I'll now turn the call over to Michael to cover the results and outlook in more detail. Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 Michael Casamento Thanks, P.K., and hello, everyone. Beginning with the flexible segment on Slide 11 and focusing on our fiscal Q2 performance. Q2 volumes were up 3% compared with last year, reflecting ongoing solid growth across all key geographies and a number of important end markets. Net sales also returned to growth, increasing by 1% on a comparable constant currency basis and higher volumes more than offset unfavorable price/mix of approximately 2%, primarily related to lower healthcare volumes. As expected and discussed in prior earnings calls, we continue to see destocking in healthcare in North America and Europe Pharmaceuticals, which resulted in a headwind of approximately 1% to overall segment volumes. Compared to the fiscal first quarter, destocking abated and the related price mix headwind improved. Exiting the second quarter, we believe healthcare destocking is now largely behind us. Across the balance of our Flexibles portfolio, volumes were up 4%, reflecting solid demand across regions and in many product categories. In North America and Europe, second quarter demand remained solid with volumes increasing mid-single digits in both regions despite the negative impact of healthcare destocking. Top line growth was strong across the Asian region, reflecting price/mix benefits and mid-single-digit volume growth, supported by strong demand in China and across Southeast Asia. In Latin America, volumes were broadly in line with last year's second quarter with good growth in Colombia and Peru, offset by demand in Argentina. From a product category standpoint, ready meals and premium coffee showed strong growth and dairy, meat, liquids and pet care were up low to mid-single digits. In healthcare, medical returned to growth. However, pharma volumes continue to be down low double digits compared with last year as a result of destocking. And as I mentioned earlier, is now largely behind us. Good earnings leverage continued and adjusted EBIT for the quarter of $322 million grew by 4% on a comparable constant currency basis. Higher volumes combined with strong cost performance and the benefits from restructuring led to another quarter of margin expansion with adjusted EBIT margins up 20 basis points to 12.8%. Turning to Rigid Packaging on slide 12. The rigid business continues to advance its performance and the trajectory of overall segment volumes improved for the fourth consecutive quarter. Net sales were approximately 1% lower than last year, reflecting an unfavorable impact Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 from price/mix of approximately 2%, partly offset by a return to volume growth with overall volumes up approximately 1%. As expected, customer and consumer demand in the North American beverage business remains soft and variable through the quarter. While beverage volumes were down mid-single digits, this marks an improvement on the first quarter of approximately 4 percentage points. Latin America volumes were down low single digits versus last year, reflecting weaker customer demand in Argentina and Colombia, which was partly offset by growth in other countries including Brazil. The specialty containers business delivered strong growth in spirits, wine and beer with volumes down in healthcare due to destocking and volumes in the closures business were higher than last year. From an earnings perspective, the business executed well in another quarter of growth and margin expansion reflecting benefits from an ongoing focus on cost and productivity measures. Adjusted EBITDA of $53 million was up 10% on a comparable constant currency basis with EBIT margin increasing by 70 basis points to 7.3%. Finally, in late December, we completed the sale of our 50% interest in Bericap North America closures business, which we announced back in October. Proceeds of $122 million were used to reduce debt, demonstrating our commitment to disciplined capital allocation, which takes us to the cash flow and the balance sheet on Slide 13. On a year-to-date basis, the business generated a net cash outflow of $38 million, which includes an inflow of more than $350 million in cash flow in the second quarter, approximately $80 million better than last year's second quarter, largely on the back of improvements in working capital. Stronger quarterly cash flow and receipt of proceeds from the Bericap sale led to a reduction in net debt of approximately $375 million compared with last quarter. Leverage also improved sequentially, coming in at 3.3x, which is in line with the expectations we provided on our October call. We expect leverage to further reduce through the second half of the fiscal year, and we remain confident in meeting our expectation to exit fiscal 2025 with leverage at 3x or lower. Through the first six months of fiscal 2025, we returned approximately $365 million in cash to shareholders through our quarterly dividend. Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 This brings me to the outlook on Slide 14. And as P.K. mentioned earlier, based on our solid first half performance and our confidence in the second half, we remain on track to deliver for the full year, and we are again reaffirming our guidance. For fiscal 2025, we continue to expect adjusted earnings to be in the range of $0.72 to $0.76 cents per share on a reported basis, representing comparable constant currency growth of 3% to 8%. We continue to expect to deliver strong growth in the underlying business for the year as earnings momentum continues to build. As we've pointed out previously it's important to remember that the guidance assumes an EPS headwind of approximately 4% related to more normalized levels of incentive compensation based on our expectations for improved annual results. Excluding this incentive normalization, we expect growth from the underlying business in the mid-single to low double-digit range. We continue to assume overall volumes will increase in the low to mid-single-digit range for the year, with trading performance through January in line with this expectation. We have updated our interest guidance to between $290 million and $300 million, bringing the midpoint modestly lower to reflect the benefit in the second half related to the Bericap proceeds being used to reduce debt. As a reminder, the overall impact of the Bericap sale on EPS for the year is relatively neutral, taking into account the loss of annualized EBIT of approximately $19 million and the benefit of lower interest. Our effective tax rate range remains unchanged at 19% to 20%. In terms of phasing through fiscal 2025, we expect this will be aligned with historical average, with the second half generating 55% to 58% of EPS based on our guidance range and the fourth quarter being the strongest of the year and typically 30% or more of full year EPS. And finally, we're affirming our expectations to generate strong adjusted free cash flow in the range of $900 million to $1 billion for the year, supporting our confidence in exiting the year with leverage back at 3x or lower, as I noted earlier. We are pleased with our continued execution across the underlying business, and we are confident in our outlook for the year. We're excited about the additional opportunities we have to accelerate future growth through our combination with Berry. So with that, I'll hand back to P.K. Amcor plc Amcor Fiscal Second Quarter and Half Year Results 2025 Peter Konieczny Thanks, Michael. A few closing remarks to summarize ahead of taking questions. We're executing well on the underlying business and are confident our merger with Berry is a winning combination for all stakeholders. The path to completion is clear with meaningful milestones already behind us. We remain highly focused on next steps to ensure we are setting the organization up for success, and we remain on track and confident the transaction will close around the middle of calendar year 2025. Kate, we're ready to take questions. Operator (Operator Instructions) Your first question comes from the line of Anthony Pettinari with Citi. Anthony Pettinari You talked about potential divestitures to strengthen the business. I'm just wondering, do you expect that those could be impactful at all to synergy targets or timeline? And then as the divestiture opportunity, do you think it's larger than maybe you had expected late last year when you announced the deal or if there's any kind of color you can give us in terms of whether these are more likely Berry assets, Amcor assets? Or just any additional color you can give? Peter Konieczny Yes. Thanks, Anthony. Look, I think you're talking about the portfolio pruning activities that I mentioned on a couple of calls earlier, and also in the context of the Berry combination. For me or for us, this is one of the additional levers that we can pull in order to orient the business towards a stronger, faster-growing business organically and a business that is more attractive in terms of a higher and better margin quality. Now with the combination with Berry, we have embarked on a work stream that essentially puts the whole portfolio on the table,. and we have started the conversations around that. So we're on it, and we're pretty much looking at everything. And as I said before, there are multiple criteria that we would apply to this analysis, but two of them are stronger intrinsic organic growth and then margin quality, would be the two outstandings. Attachments Original document Permalink Disclaimer Amcor plc published this content on February 05, 2025 , and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 05, 2025 at
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