Amcor plc

Ladies and gentlemen, thank you for standing by, and welcome to AMCOR's Q3 year-to-date results. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Tracy Whitehead. Thank you. Please go ahead, ma'am.

Thank you, Operator, and welcome to AMCOR's third quarter earnings call. Joining the call today is Ron D'Elia, Chief Executive Officer, and Michael Casamento, Chief Financial Officer. At this time, I'll direct you to our website, amcor.com, under the Investors section, where you'll find our press release and presentation, which will be discussed on the call today. We'll also discuss non-GAAP financial measures as we talk about performance against combined comparative information. Reconciliations of these non-GAAP measures can be found in the press release and presentation on our website. Also a reminder that statements regarding future performance of the company made during this call are forward-looking and subject to certain risks and uncertainties. Actual results may differ from historical expected or predicted results due to a variety of factors. Please refer to AMCOR's SEC filings including our statement on Form 10-K and 10-Q to review these factors. With that, I'll turn over to Ron.

Thanks, Tracy, and thanks, everyone, for joining us to discuss AMCOR's year-to-date results. Joining me on the line, as Tracy mentioned, is Michael Casimeno, AMCOR's chief financial officer, and we'll begin with some prepared remarks and then open the line for Q&A. We'll start with safety. We start every meeting with safety and always have, and obviously the topic takes on a different meaning in today's environment. Our goal is no injuries, and we're making good progress this year so far. This fiscal year, we've got 8% fewer injuries in the first nine months of the year, and more than half of our sites around the world have been injury-free for at least 12 months. We're really pleased with that progress at a time with so much distraction and new ways of working to accommodate physical distances, et cetera. Never more important than today, and our employees have really risen to the occasion and remained vigilant. Moving on now to the key messages we have for the call today. It's obvious these are unprecedented times for everyone and lots of challenges that no one's had to deal with before. And against that backdrop, it's important to make clear that Amcor is absolutely not immune, but we are relatively well positioned and we've been demonstrating resilience. So that's the first key message today. And there are a number of reasons for that, which I'll come back to in a minute, but it really starts with commitment of our 50,000 employees around the world and their dedication and resilience through this period has been amazing and we can't thank them enough. The second key message is that our financial results have been strong through nine months and for the second consecutive quarter we've increased our outlook for the 2020 financial year. We now expect EPS growth of 11 to 12 percent and will generate over a billion dollars of free cash flow this year. We've had good organic growth and momentum building in the businesses, and we've also benefited from faster delivery of synergies from the acquisition of Bemis last year. Now, we're coming up on the one-year anniversary of that deal, which was an all-stock transaction, the largest in Amcor's history, and by all measures, it's been exceeding our expectations so far. So that's the third point. Fourth, we have a clear line of sight to controllable drivers of shareholder returns in the near term, defensive organic growth, further cost synergies to come, a compelling dividend, and also the benefits from having bought back over 3% of our shares outstanding so far this year. And lastly, longer term, we'll remain well positioned to generate continued value for shareholders in all macroeconomic conditions. Five Five relates specifically to COVID-19. And with almost 50,000 employees and 250 factories, around the world in over 40 countries. A global pandemic creates a global challenge for a company like ours. And the work to manage through it has been massive, as you can imagine. So early on, we established three guiding principles. It starts with keeping our employees healthy. Everything we do starts with safety anyway, so this would be the natural starting point for us. And we're taking many extra steps now. More frequent cleaning and disinfection of our facilities and equipment. obviously increased physical distancing, restricted travel, et cetera, protective masks, lots of work from home arrangements as well. And again, our employees have been incredibly adaptive and agile as we've introduced new measures to help keep them safe and healthy. Contributing to the communities in which we operate has also been a guiding principle. We're fortunate we've been able to keep our people employed and our operations running so we can help those around us who've been less fortunate. And there are hundreds of examples from around AMCOR of great initiatives really at the local level, which range from producing face masks and face shields to donating packaging for hand sanitizer or supporting community food banks and healthcare agencies. There's lots of really good passionate work by the teams around the world. And of course, since we make packaging for food and healthcare products, we've gotta keep our plants running so we can continue to supply our customers. And doing that's required extensive planning, obviously to prevent any issues, but then also to deal with them in an efficient way should they arise. And we've been doing just that. So again, we've not been immune here, but we've managed well so far with minimal disruptions. And I mentioned at the outset that AMCOR is relatively well positioned and demonstrating resilience. And I want to come back to that for a few minutes, starting with slide six. One reason we remain in a relatively good position today and why it's so important that we keep our plants running is because Amcor is making primary packaging for consumer staples. That's really all that we do. It's essentially who we are. We're making packaging for defensive consumer segments like food, beverages, medical and pharmaceutical products, products that people need all the time, obviously, including now. And these supply chains have been recognized as essential by governments and healthcare authorities around the world. And that essential designation extends to Amcor and provides us with the licensed to continue operating. And almost all of the products we package are for home consumption or use in medical facilities or sold through retail. Very little of our packaging is for on-premise consumption or for sales through the food service channel. And turning to slide seven, the primary packaging that MCOR makes for food and healthcare products has always played several important roles to protect consumers and ensure food safety, to preserve products, extend shelf life, and to promote brands. And those things will always be important. But right now, in the current environment, certain needs are especially important for consumers and companies around the world. Hygiene would be the most obvious one. In every aspect of our lives now, hygiene has become much more front and center. Is this beverage I'm about to drink out of, this beverage container, is that clean? Is this medical product sterile? Should I buy the loose lettuce from the open bin or the packaged lettuce? These are the questions that people have on their minds now. Convenience is another one. We're eating at home now more, obviously. I don't have any more time than I used to have, probably less. So how can we make cooking and food preparation easier? Can we just pop this product in the microwave? And then automation. If you're running a factory right now, you're asking about automation, not just about cost, but also about worker safety and whether or not there's a packaging solution that could make the production process less labor-intensive. It's way too early to project how any of these needs will evolve or what priority they'll be given over time. But it is clear that long-term demand for food and health care packaging will continue. And that demand will be there globally. And as slide eight indicates, Amcor is present in all the major developed and emerging markets around the world. And so in this challenging time, we've benefited from our scale, but also our geographic breadth and diversification. Scale provides many advantages. at times like this, starting with the ability to ensure we have access to raw materials and other supplies, but also making sure we have redundancy in our supply chain and our production network. If production is disrupted in one region, there's the opportunity to source from another. And of course, being diversified geographically means, in this instance, while one region may be struggling like China was earlier this year, other regions have been less impacted. And especially during the pandemic, being so global has also meant that we've been able to share learnings as different parts of the world have suffered through the pandemic at different times. And so we've learned from the experiences in Asia and Europe now as we've dealt with the outbreak at later dates in the Americas. And lastly, turning to slide nine, AMCOR is also relatively well positioned by virtue of our strong financial situation. The market positions we have and the scale and the defensive consumer segments we supply have led to consistently strong cash flow, which in turn has enabled consistent financial performance and shareholder returns, and that's continuing this year. We also have a strong balance sheet. We're committed to an investment-grade credit rating, and we've always maintained lower leverage than most of our industry peers. So with consistent cash flow and a solid balance sheet, we've continue to have plenty of cash to reinvest in the business, as well as to distribute to shareholders. And while our dividend has always been compelling, it's especially compelling right now relative to the alternatives that investors might consider. So Amcor is certainly not immune from the impacts of COVID-19, and we've not been spared by any means, but we're relatively well positioned to navigate the challenges. And I'll touch briefly on slide 10 on what we've seen over the last few months. We try to run the company for the long term and we focus on one year at a time. So we normally discuss results on a year-to-date basis. But clearly it's an unusual time and we appreciate the need and the interest in some more insights on recent trading activity. And so that's what we've got here on slide 10. The key message on the slide here is thus far we've seen no material impact on our financial results that we could directly attribute to COVID-19. We're a global company with balanced exposure across North America, Europe, and the emerging markets. And we've seen plenty of puts and takes on volume, especially across regions and categories. But ultimately, sales in the third quarter were in line with the long-term averages that we've seen in the business. And there have been no real cost impacts, so no real material impacts on the financials for the company so far. And the results for the third quarter were in line with our expectations. Now, slide 10. lays out what we've seen using volume growth for the third quarter. And you see the positives and negatives across the global portfolio. Overall volume growth for Amcor was about 2% in the quarter, 1% in our flexible segment, 5% in rigid packaging. We had good volume growth in North America for beverage packaging, as well as flexible packaging, where in flexibles, North America represents about one third of our sales in that segment. Another third of sales in the flexible segment is in Europe, and volumes increased by about 1% in the quarter. And then the other third in the flexible segment would be in Latin America, Asia, and especially cartons. And those sales for the quarter were down low to mid-single digits. By end market, healthcare continues to grow well around the world. It's obviously a pickup in home care and protein packaging. had a good quarter. On the other hand, anything that does go through the convenience channel or on-premise, of which this very small part of our portfolio was a bit softer. More recently, in April, we didn't see many changes. But Latin American volumes in all of our businesses in that region were very soft. And beverage packaging volumes in North America were also weaker, given that packages often sold through the convenience channel. So other than in the most obvious cases, Quite difficult to quantify with any degree of precision exactly what the COVID impact on those volumes has been, but all up at about 2% volume growth, the results were consistent with our longer-term averages. So the key takeaway here is that we remain relatively well-positioned and resilient. And let me pass the call over to Michael to discuss the financials in more detail.