Amcor plc

Good day and thank you for standing by. At this time, I would like to welcome everyone to the AMCOR half-year 2021 results conference call. All lines will be placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you would like to draw your question, press the pound key. Thank you. And it's now my pleasure to send the conference over to Tracy Whitehead, Global Head at Investor Relations. Now, please go ahead.

Thank you, Operator, and welcome everyone to AMCOR's first half earnings call for fiscal 2021. Joining the call today is Ron D'Elia, our Chief Executive Officer, and Michael Casamento, our Chief Financial Officer. At this time, I'm directing your attention to our website, amcor.com. under the investor 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 and related reconciliations can be found in the press release and the presentation. Also a reminder that statements regarding future performance of the company made during this call are forward looking and they're subject to certain risks and uncertainties. Actual results may differ from historical expected or predicted results due to a number of factors. please refer to our SEC filings, including our statements on 10-K and 10-Q forms to review these factors. With that, I'll hand over to Ron.

Thanks, Tracey. Thanks, everyone, for being with us today to discuss AMCOR's first half results for the 2021 fiscal year. We appreciate you taking the time and making the effort to join the call. As Tracy mentioned, joining me on the line today is Michael Casimeno, AMCOR's CFO. And we'll start with some brief prepared comments before we take your questions. But the first place we'll start on slide three is with safety and everything we do at AMCOR starts with safety. And this year, of course, we're also focused on keeping all of our coworkers healthy as well. And over the last 12 months, our COVID protocols have enabled us to do just that while also keeping our plants running to supply our food and healthcare customers around the world. And despite the added challenges of operating during the pandemic, our safety performances continue to be a real highlight. Across the company, we reduced the number of injuries by almost 30% during the first half. And all of our business groups had fewer injuries compared to the first half last year. And we're also pleased to report that over half of our sites around the world were injury-free for at least 12 months. So we still have not reached our goal of no injuries, but we need to acknowledge the commitment and focus of all of our coworkers to keeping each other healthy and also safe, especially in the current environment. Our key messages for today are set out on slide four. First, AMPLER had a strong first half to fiscal 21, ahead of our expectations, balanced across all businesses and regions. And that strong first half translates into higher expectations for the full year on the back of strong momentum in the base business. And so the second key message today is that we've raised our outlook for EPS growth full year fiscal 21 to 10% to 14% on a constant currency basis. Third, we're also increasing cash returns to shareholders through a higher dividend and $200 million of additional share repurchases. And the fourth point is that we continue to believe AMCOR has never been better positioned from an investment case perspective. And I'll spend a few minutes explaining why we believe that before I turn it over to Michael, who will describe the recent results in more detail. Slide five is a simple snapshot of AMCOR today. And understanding who we are and what we do has to be the basis for understanding that investment case. The company's been around a long time, over 160 years, and is now the global leader in consumer packaging. And Amcor is a truly global company with scale positions in every major region, including over $3 billion of annual sales in faster-growing emerging markets, where we also have leadership in scale positions. Essentially, all of our sales are to fast-moving consumer or healthcare segments, and the healthcare business now generates around $2 billion of sales each year to the medical device and pharmaceutical markets. which are among the most attractive places to play in the packaging industry. And finally, regardless of whether they're operating in developed or emerging markets or in consumer or healthcare segments, all of our businesses go to market with differentiated innovation capabilities, which are increasingly valued by our customers as they look for packaging to meet shifting consumer needs around the world. Slide six is another quick snapshot, this one to highlight Amcor's performance and track record over the last 10 years. And we've maintained, as a starting point, a consistent investment-grade capital structure despite several transformational transactions. And we've driven consistent sales and earnings growth and always had high cash conversion. And that cash flow has funded capital investment in the business in close to 30 acquisitions over this time period, along with share repurchases and a growing dividend with an attractive yield. And added together, and shareholders have been rewarded as well as the company has delivered consistent operating performance. Going forward, we expect our operating performance and cash flow to remain at least as strong, and our approach to allocating that cash is set out on slide seven. This is not new. There's no changes here to this framework, but it's worth just reviewing. We consistently generate significant free cash flow every year, and this year our free cash flow will be nearly $1.1 billion, and that number will grow over time. And that cash flow will comfortably support reinvestment in the business, as well as M&A or share repurchases. And in addition, we'll continue to pay an attractive and growing dividend, which has historically yielded between 4% and 5%. Taken together, the EPS growth and dividend yield should result in 10% to 15% of shareholder value each year. And so while we've been delivering returns to shareholders at this level for a long time now, momentum is building in the business, and we believe this is a special time for the company and our investors. Slide 8 is the slide we shared last year at our investor briefing, and it remains relevant today. And we believe that the employer investment case is as strong now as it's ever been, and we set out the reasons why in this slide. And several of the points I've made already, global leadership positions, consistent growth from attractive markets, strong balance sheet and cash flow to fund growth, and dividends and a consistent track record, And they're all important features of our investment case. But we also believe that momentum matters in business. And in that last respect, the last point on the slide might just be the most important. Momentum has been building across AMCOR over the last couple of years, and we expect it to continue. And that should be clear from our recent performance, including the first half result and the increased full-year guidance that we're announcing today. At the core of our investment case is the consistent organic growth Amcor generates in several ways, as set out on slide nine. The starting point for the organic growth is the mix of growing and markets we play in, and that's especially true in emerging markets. We've had a long history of profitable participation and profitable growth in emerging markets, and high-impact locations like China and India continue to grow sales and profit at impressive rates, including in the most recent half. Managing our sales mix across higher value, more packaging-intensive consumer end markets like protein and premium coffee, and more differentiated product types like hot fill containers or barrier films drives consistent margin expansion and volume growth over time. And we have a global healthcare business approaching $2 billion in sales from every region of the world and across the pharmaceutical and medical device segments. Innovation is also an important growth driver for Amcor and probably the area where we are the most differentiated from our competition. Our customers are launching new products in Amcor packaging regularly. We've highlighted a few examples here of new and actually more sustainable products commercialized in recent months, including an extension of our HeatFlex family of products with a world-first microwavable recycle-ready pouch for food and some premium coffee packaging using a bio-based polymer. And finally, a common thread that cuts across all of what we do is sustainability, which we believe is Amcor's greatest opportunity for growth and differentiation. A few more comments on slide 10 to describe our comprehensive sustainability agenda, which includes our products but also our factories. Of course, we're deeply committed to the idea of responsible packaging, and we're working with our partners upstream and downstream to address concerns about packaging waste in the environment. We've stepped up to take a leadership role in the development of responsible packaging, which we believe requires three things. The first is package design, which accounts for the full product lifecycle in addition to the end-of-life or waste profile. And AMCOR is uniquely positioned here with leading R&D and innovation capabilities to handle the package design requirements, and we pointed out some examples already in this presentation. The other two requirements for responsible packaging require collaboration. with others across our value chain, and AMCOR has been active in that way as well to help drive improvements in waste management and consumer participation. A couple of examples over the last six months help highlight that work. In one case, AMCOR is joined with 35 leading brands and retailers in the Consumer Goods Forum in a CEO-led initiative to develop package design rules to deliver packaging that's easier and more cost-effective to recycle. In another example, we've extended our work with the Carbon Trust to launch a label that can be printed on pack to indicate reduced CO2 intensity and provide greater transparency to the carbon footprint reductions enabled by our packaging. And the value created through our work on these initiatives and the progress we've made across a range of other ESG areas, including our EnviroAction program and all of our plants to drive greenhouse gas reduction, waste and water reduction, continues to be recognized by leading independent organizations, most recently MSCI and Dow Jones. Turning now to a summary of our first half results on slide 11. We had strong earnings growth with EPS up 16% in constant currency terms, including 7% organic growth, and strength in both the rigid packaging and flexible segments. Demand for our products remained balanced across regions and businesses, resulting in volume and sales growth in every region, and 3% for AMCOR overall. The execution discipline and operating performance of the businesses drove cost performance, which also contributed to the organic profit growth. Roughly 6% of the EPS growth came from synergies from the Bemis acquisition, which was ahead of expectations, and cost synergies totaled an incremental $35 million pre-tax during the half. And lastly, benefits from share repurchases accounted for the remaining EPS growth. Free cash flow is in line with expectations, and our balance sheet remains strong, and the company returned $450 million of cash to shareholders through dividends and share repurchases during the first six months. Strength in the underlying business also enables us to increase cash returns to shareholders for the balance of the year. The board declared a quarterly dividend of 11.75 cents per share, which is higher than the prior year, and we announced today an additional $200 million of share repurchases bringing the total announced this year to $350 million, which we expect to complete during the remainder of FY21. The key theme enabling the strong performance in the HAP across the company has been the ability of every one of our businesses to execute and outperform against the things that are within our control, despite an incredibly challenging and volatile external environment. Safety, working capital, cost synergies, cost performance, innovation, in all of those areas, the execution has been outstanding, and we could not be more pleased with the performance of our teams through the first six months of the year. The key message here is that Amcor had a strong first half with results ahead of expectations, and we have an improved outlook for the full year and increased dividends and share repurchases to go along with it. With that, I'll hand over to Michael to provide some additional colour on the financial performance for the half year and the outlook for the rest of 2021.