Amcor Plc Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Safety: Achieved an industry-leading total recordable incident rate of 0.30 and 79% of sites remained injury free for more than a year. Safety and well-being of people is a top priority.
• Base Business Execution: Q2 results were in line with expectations. Return to overall sales growth in Q2 with net sales of $3.2 billion slightly ahead of last year. Overall volumes grew by 2.3%, improving on the first quarter. Adjusted EBIT increased by 5% and adjusted EBIT margin expanded by 40 basis points. Fourth consecutive quarter of sequential volume improvement and margins continued to improve.
• Merger with Berry: Progressing well on closing the merger. Filed definitive joint proxy statement prospectus with the SEC, shareholder meetings scheduled for February 2025, initial regulatory approvals received, and board composition finalized. Focused on integration preparedness with plans for the first 100 days post-close.

Segment Performance

• Flexibles: Q2 volumes were up 3% compared with last year. Net sales returned to growth, increasing by 1% on a comparable constant currency basis. Higher volumes more than offset unfavorable price mix of approximately 2%. Adjusted EBIT for the quarter was $322 million, up 4% on a comparable constant currency basis. Adjusted EBIT margins were up 20 basis points to 12.8%.
• Rigid Packaging: Overall segment volumes improved for the fourth consecutive quarter. Net sales were approximately 1% lower than last year due to an unfavorable impact from price mix, partly offset by a return to volume growth. Adjusted EBIT of $53 million was up 10% on a comparable constant currency basis, with EBIT margin increasing by 70 basis points to 7.3%. In late December, the sale of the 50% interest in Bericap North America closures business generated $122 million in proceeds used to reduce debt.

Guidance

• Reaffirmed full-year adjusted earnings to be in the range of $0.72 to $0.76 per share on a reported basis, representing comparable constant currency growth of 3% to 8%.
• Overall volumes expected to increase in the low to mid-single digit range for the year. Trading performance through January in line with this expectation.
• Interest guidance updated to between $290 million and $300 million. Effective tax rate range remains 19% to 20%.
• Expect to generate strong adjusted free cash flow in the range of $900 million to $1 billion for the year, confident of exiting fiscal 2025 with leverage at three times or lower.

Risks

• Forward-looking statements based on management's current views and assumptions. Factors that could cause future results to differ from current estimates reference Amcor's SEC filings, including Form 10-K and 10-Q for further details.

Q: Anthony Pettinari asked about potential divestitures impacting synergy targets or timeline.

A: Peter Konieczny said portfolio pruning is a lever for organic growth and margin quality, early to determine impact on synergies, focusing on stronger intrinsic organic growth and margin quality.

Q: Keith Chau asked about underlying demand and price mix in Flexibles.

A: Peter Konieczny said consumer demand softened in Q2, healthcare destocking behind us, expecting improved mix in back half with healthcare returning to growth. Michael Casamento added profit performance in Flexibles was in line with expectations, cost focus with lapping difficult comps.

Q: George Staphos asked about momentum in Flexible Packaging, EBIT conversion, and volume exit rate.

A: Peter Konieczny confirmed volume guidance of low to mid-single digit for full year. Michael Casamento said profit performance in Flexibles was in line with expectations, cost focus with labor adjustments, no material impact from FX or incentives.

Q: Daniel Kang asked about integration planning event with Berry.

A: Peter Konieczny said organizing integration work streams, gaining confidence in $650 million synergies, procurement being biggest single item with $325 million of synergy capture.

Q: Matthew Krueger asked about raw materials and tariffs.

A: Michael Casamento said raw material basket flat in first half, expected benign in Q3, low impact from tariffs due to regional business and pass-through opportunities. Peter Konieczny added regional business and pass-through agreements help with tariffs.

Q: Jakob Cakarnis asked about healthcare business trajectory post-merger.

A: Peter Konieczny said healthcare destocking over, medical improving, pharma destocking abated, healthcare to return to growth, improving mix and margin impact.

Q: Michael Roxland asked about due diligence with Berry and cost profitability.

A: Peter Konieczny said no surprises in due diligence, becoming more confident in synergies. Michael Casamento said continuing cost focus on operations, labor pool, shift patterns, and residual benefits from restructuring programs.

Q: John Purtell asked about benefits of Berry merger on Rigids and closures.

A: Peter Konieczny said Berry combination complements Amcor's Rigids business, particularly in specialty containers and healthcare, closure and dispensing systems complementary but specifics to be confirmed later.

Q: Keith Chau asked about first half-second half split of guidance.

A: Michael Casamento said phasing based on historical average, confident in second half, volume growth in low single digit to mid-single digit, mix improvement in second half with healthcare returning to growth.