Amcor plc

Good afternoon. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to the AMCOR third quarter 2023 results conference call. All lines have been 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 this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to our host, Ms. Tracey Whitehead, Head of Investor Relations. You may begin your conference.

Thanks, Christy, and thank you, everyone, for joining AMCOR's fiscal 2023 third quarter and year-to-date earnings call. Joining today is Ron D'Elia, AMCOR's Chief Executive Officer, and Michael Casamento, Chief Financial Officer. Before I hand over a few items to note, on our website, amcor.com, under the Investor section, You'll find today's press release and presentation, which we will discuss on this call. Please be aware that we'll also discuss non-GAAP financial measures and related reconciliations can be found in that press release and the presentation. Remarks will also include forward-looking statements that are based on management's current views and assumptions. The second slide in today's presentation lists several factors that could cause future results to be different than current estimates. and reference can be made to AMCOR's SEC filings, including our statements on Form 10-K and 10-Q for further details. Please note that during the question and answer session, we request that you limit yourself to a single question and one follow-up, and then rejoin the queue if you have any additional questions. With that, over to you, Ron.

Thanks, Tracey, and thanks, everyone, for joining Michael and myself today to discuss AMCOR's March quarter and year-to-date results for fiscal 2023. We'll begin with some prepared remarks, starting, as we always do, with safety on slide three. Safety is our most important value at AMCOR, which means our commitment to keeping our coworkers safe is unwavering. We're highly proactive in our approach to continuous safety improvement, and our results continue to be rewarded. On a fiscal year-to-date basis, we've reduced injuries globally by 23% compared to last fiscal year, and 64% of our global sites have been injury-free for 12 months or more. While these are excellent industry leading results and a reflection of our commitment to mitigating risk and protecting our people, the journey towards zero injuries continues. Turning to our key messages on slide four. First, Amcor's portfolio is well positioned and is primarily exposed to consumer staples and healthcare and markets. We have leadership positions in several strong underlying businesses, a compelling customer value proposition, and differentiated execution capabilities, all of which contributed to solid financial performance for the first nine months of fiscal 2023. That said, we're not completely immune to broader market challenges, and we were cautious heading into the third quarter. Market dynamics led to increased volume softness and volatility throughout the quarter, particularly in the month of March, and our updated outlook assumes this continues through the balance of the fiscal 2023 year. Against this backdrop, our teams remain laser focused on supporting decisive price and cost actions. The recovery of higher input costs remains a top priority, and we're also taking a range of actions to flex and reduce operating costs while advancing structural cost reductions. These actions give us confidence that earnings growth will build as we progress through fiscal 24. Importantly, we remain focused on executing against our strategy for long-term growth and value creation. We have a strong, well-positioned business, and while we navigate short-term challenges, we'll continue to reinvest for organic growth, pursue M&A opportunities and or repurchase shares, and pay a compelling and growing dividend. Moving to slide five for a summary of our financial results. Reported net sales for the first nine months were up 4%, which includes an unfavorable currency impact of 4%. and approximately $750 million of price increases related to higher raw material costs. Organic sales were up 2% on a comparable constant currency basis, and volumes were 2% lower. For the March quarter, sales were up 1% on a comparable constant currency basis, with volumes down approximately 3.5%. In both periods, price mix benefits of around 4% included recovery of general inflation, which is totaled approximately $240 million on a year-to-date basis and approached 100 million for the quarter. Year-to-date adjusted EBIT of 1.2 billion and EPS of 54.1 cents per share were both up 4% on a comparable constant currency basis, benefiting from strong operating leverage in the first half of the year. In the March quarter, Adjusted EBIT of $382 million was down 2.5% on a comparable basis versus the prior year, a modest decline as proactive cost actions helped offset significant headwinds related to a challenging operating environment. We continue to execute well in our capital allocation priorities, returning approximately $745 million of cash to shareholders during the first nine months through a combination of dividends and share repurchases. We ramped up our share repurchases during the third quarter, And year to date, we've bought back 18 million shares for a total cost of $200 million. And our overall financial profile remains robust, with return on average funds employed above 16%. Now, turning to slide six, I want to provide a bit more color on what we've seen through the third quarter, and more importantly, the decisive actions we're taking and will continue to take. Three primary factors influenced our performance in both the flexibles and rigid packaging segments in the quarter. First, the general market remained soft and more volatile, leading to lower volumes from a combination of weaker consumer demand and further destocking. Last quarter, we highlighted that demand would be a critical driver of our financial performance, and we expected Q3 and Q4 volumes could be in the range of plus or minus low single digits. In January and February, volumes were tracking at the lower end of those expectations, down between 1 and 2 percent, then weakened through the month of March to be down almost 7 percent. Volatility in customer order patterns also increased throughout the quarter, most notably in our rigid packaging North American beverage business. Our teams are adept at flexing the cost base to match anticipated demand. although more volatility in orders compromises the ability to pull the appropriate cost levers quickly enough in response, leading to operating inefficiencies. Second, mixed trends were unfavorable across much of the business. Destocking continued in higher value premium coffee and protein categories, and although healthcare continued to contribute solid growth, it was at a slower rate as we begin to lap a very strong prior year. Our North American beverage business also experienced unfavorable product and customer mix. And third, cost inflation is ongoing as we expected. While the rate may be moderating in some areas, inflation remains elevated in most of our markets. So these impacts are not entirely new, and we saw the need for caution at the back end of last quarter and have been out in front, proactively managing the controllables and taking decisive price and cost actions, which continued in Q3. First, we've successfully driven more than a billion dollars of price on a year-to-date basis to compensate for higher raw materials and general inflation. And we'll continue to take further actions where inflation persists. Second, we continue to actively flex and reduce operating costs. We've reduced our global headcount by more than 1,000 positions, lowered discretionary spending, increased the number of full or partial plant shutdown days, and extracted more procurement benefits. Year to date, these efforts have lowered costs by approximately $140 million. We expect to drive additional cost savings of approximately $50 to $60 million across the business in Q4, including a further reduction of approximately 200 positions. And third, as we've previously announced, we're also pursuing a range of structural cost savings initiatives. And to date, we've announced three plant closures and one partial closure. And we could add more depending on how the demand environment evolves. We expect to deliver at least $50 million in cost savings from these structural initiatives, which will begin to benefit earnings in fiscal 24, primarily in the second half. We expect current market conditions will persist in the near term, so we remain laser focused on controlling what we can control and responding with actions. I'll now turn over to Michael to cover more of the financials.