Amcor plc

Ladies and gentlemen, thank you for standing by, and welcome to the AMCOR third quarter 2021 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. Please be advised today's conference is being recorded, and if you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Tracy Whitehead. Please go ahead.

Thank you, Operator, and I'd like to welcome everyone to AMCOR's third quarter earnings call for fiscal 21. Joining the call today from AMCOR's side is our Chief Executive Officer, Ron D'Elia, and Chief Financial Officer, Michael Casamento. At this time, I'll direct your attention to our website, amcor.com, under the investor section, where you'll find our press release and presentation, which we will discuss today. We'll also discuss non-GAAP financial measures and related reconciliations can be found in those documents on our website. As a reminder, the call today includes some forward-looking comments which remain subject to certain risks and uncertainties. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we're discussing today. With that, I'll hand over to Ron.

Thanks, Tracy, and thanks, everyone, for joining us today to discuss AMCOR's year-to-date results. Joining me on the line, as Tracy indicated, is Michael Casimeno, our Chief Financial Officer. And we'll begin with some prepared remarks and then open the line for Q&A. Starting with slide three, we begin every meeting at AMCOR with safety, so we'll start today with safety as well. And this year, our safety performance has been a real highlight. Across AMCOR, we've reduced the number of injuries by almost 30% in the first nine months of the year, and all of our business groups reported fewer injuries, with over half of our sites remaining injury-free for the last 12 months or more. And of course, over the last year, we've also been equally focused on keeping our co-workers healthy as well as safe. And as the COVID pandemic continues to present challenges in many countries, Maintaining our protocols and our vigilance remains a top priority for our teams around the world, who also understand the critical role we play in helping maintain availability of essential healthcare and food products. Given the continued challenges of navigating the pandemic, we're particularly pleased with our safety performance so far this year, and we remain confident that our objective of no injuries is in fact possible. Our key messages for today are set out on slide four. First, our year-to-date financial results have been strong and ahead of expectations, with organic momentum continuing through the year such that the March quarter has been our strongest thus far this year, despite the operating environment remaining dynamic and volatile, maybe even more so over the last few months. Our teams have navigated that volatility by demonstrating an exceptional ability to stay focused on the key business drivers within our control, to respond quickly as conditions change, and to execute to deliver results despite the circumstances. Second message here is that this strong performance translates into higher expectations for the 2021 fiscal year, and we've raised our outlook for full-year EPS growth to 14% to 15% on a constant currency basis. And third, we're actively investing in several growth initiatives, which illustrate the range of opportunities we have over the medium term to maintain a momentum. The strong result, increased guidance, and growth investment examples demonstrate the strength of our investment case, which I'll touch on briefly on slide five before turning to the results in more detail. The MCOR investment case is set out on slide five, and it's one we've shared a few times this year. We believe the investment case is as strong as ever, and this slide sets out the reasons why, including our global leadership positions, consistent growth from attractive end markets, a strong balance sheet, and significant annual cash flow of more than $1 billion and growing to fund growth investments and dividends. And lastly, momentum has been building, which you can see in our upgraded guidance, and we believe that will continue. Looking ahead into fiscal 22, we'd expect BPS growth to benefit from continued organic growth, additional synergies from the Bemis acquisition, a lower share count after the repurchases during FY20 and 21, and the value that will be created from the $300 to $400 million of free cash flow that will remain after CapEx and dividends. So the AMCOR investment case has not changed, and that's part of the message here today. Despite volatility in our operating environment, and maybe even more so because of that volatility, the AMCOR investment fundamentals remain very attractive and will continue to generate a total value of 10% to 15% each year across EPS growth and dividends. Slide six includes the actual outcomes of that investment case over the last decade. Over this period, we've always maintained an investment-grade capital structure. We've delivered consistent sales and profit growth, including margin expansion organically through multiple economic and commodity cycles, and we've consistently paid out a compelling dividend. And that growth and yield has been supported by best-in-class free cash flow conversion and return on invested capital, which have also contributed to strong total returns to shareholders as well. Organic growth has always been a key driver of our overall financial performance, and that will become increasingly evident going forward. Slide 7 highlights three of the key organic growth drivers for AMCOR. The starting point on the left is the set of growing end markets we serve around the world. Now, Amcor has substantial positions in several higher-growth, higher-value-add, more packaging-intensive segments like healthcare, protein, and premium coffee, or hot-filled beverage containers and barrier films. In each of these segments, market growth tends to track higher than average, and in each one, we have differentiated positions, scale positions, differentiated products, and global leverage opportunities. Second, emerging markets will also continue to be a key source of organic growth for Amcor. We've got a scale emerging markets portfolio with over $3 billion in annual sales from 27 profitable emerging market businesses where we benefit from leadership positions and differentiated capabilities and where we have a long history of profitable growth. And third, growth enabled by innovation, which is an area where we continue to differentiate ourselves from competition, and we're investing to extend that lead. All of our businesses go to market with world-class innovation and R&D capabilities, which are increasingly valued by our customers as they look for packaging to meet shifting consumer needs around the world, particularly around sustainability, which I'll come back to in a minute. We're also allocating capital and actively investing for growth in a number of areas, and slide eight shows two examples. First, the example on the left. Within a few weeks, we will expect to begin commissioning a major capacity expansion for one of our aluminum-based product segments at a flexible packaging plant in Switzerland. This investment will support the continued high growth of the premium coffee segment and is underwritten by a long-term supply agreement with a key customer. We've made a number of similar investments over the years and several recently, where we have real long-term partnerships with higher-growth customers who value the various ways Amcor can help them grow. In the other example on the right-hand side of the slide, in the last quarter, we began construction of a new greenfield plant in China to add capacity to our business in that high-growth market, where we already maintain a leadership position and healthy financial profile. The new state-of-the-art plant will be the largest in Amcor's China network and will start up by the end of calendar 2022 to support a range of global and local customers, primarily in the food and personal care segments. And turning to slide nine, last week we announced a corporate venture type investment in EPAC, a relatively new startup in the flexible packaging space who has leveraged technology and a unique business model to grow to $100 million in sales in just over four years. As excited as we are to work with EPAC, the key point of this slide is to make clear our intentions to do more with regard to open innovation and corporate venturing generally, so that we can complement our internal innovation capabilities with great external ideas from all around the world. We're looking forward to exploring opportunities across new packaging products, processes, and business models, and we'll be much more systematic and purposeful in this area. And moving to slide 10. It remains very clear to us that our best and most exciting opportunity for growth and differentiation will come from the development of more sustainable packaging. More sustainable packaging means responsible packaging, starting with better package design. And on that dimension, which needs to take into account the full product lifecycle, there's no one better positioned in the industry than Amcor, and we're demonstrating that with a steady stream of new product platforms and launches around the world. Waste management and consumer participation will be equally important, and both require close collaboration with others across our value chain. And AMCOR has been actively partnering with others in both areas to drive scalable solutions and real impact, and I'll describe some of the progress we're making on the next slide. The KitKat example on the left is a great one because it demonstrates the potential for Amcor to use chemically recycled resin in food-grade flexible packaging, and it also highlights the level of collaboration that's possible across the full value chain to make it happen, in this case, in Australia. In the middle is AmSky, which is a breakthrough innovation launched by Amcor just last week. Now, Amcor created the world's first recycle-ready thermal form blister packaging by eliminating PVC without compromising functionality or the consumer experience. And AmSky is an exciting development which has the potential to transform the sustainability profile of healthcare packaging, particularly for solid-dose pharmaceuticals, but it also highlights the potential to eliminate PVC in other packaging segments as well. The example on the right-hand side of the slide is another one that brings to life the concept of responsible packaging with a real example in practice, in this case in the UK. The supermarket rollout of this rice product in a recycle-ready, microwavable pouch made with Amcor's HeatFlex technology coincided with a number of UK retailers announcing in-store trials to collect and recycle flexible packaging. And this one demonstrates that responsible packaging design enabled by AMCOR can catalyze change and motivate progress on the waste management and consumer participation requirements as well. And finally, in March, AMCOR also took an executive committee role in the Alliance to End Plastic Waste, a group whose mission is fully aligned with our vision for responsible packaging through design, infrastructure, innovation, and consumer participation. Turning now to a summary of our results on slide 12, the business has delivered strong year-to-date earnings growth with EPS up 16% on a comparable constant currency basis. And of that EPS growth, 7% was organic. As overall demand for our products has remained healthy and combined with outstanding execution has resulted in organic growth continuing to build each quarter. 6% of the EPS growth comes from incremental Bemis acquisition synergies, which have reached $55 million so far this fiscal year. We continue to progress ahead of initial expectations and we're well positioned to deliver at least $180 million of synergies by the end of fiscal 22. And the remaining 3% EPS growth reflects benefits from share repurchases in fiscal 20 and 21. Free cash flow and the balance sheet continue to be strong and in line with our expectations, and we've returned more than $850 million so far this year of cash to shareholders through higher dividends and share buybacks. So the key message here is that we're executing very well, building momentum, delivering strong growth and cash returns to shareholders. With that, I'll hand over to Michael to provide some further detail.