Thank you for standing by. My name is Kate, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Amcor Half-Year Results 2025. [Operator Instructions] Thank you. I would now like to turn the call over to Tracey Whitehead, Head of Investor Relations. Please go ahead.

Thank you, Kate, and thank you, everyone, for joining Amcor's fiscal '25 second quarter earnings call. Joining today is Peter Konieczny, Chief Executive Officer; and Michael Casamento, Chief Financial Officer. Before I hand over, let me note a few items. On our website, amcor.com, under the Investors section, you'll find today's press release and presentation, which we'll discuss on this call. Please be aware that we will 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 and third slides in today's presentation list several factors that could cause future results to be different than current estimates. Reference can be made to Amcor's SEC filings, including our statements on Form 10-K and 10-Q for further details. [Operator Instructions] With that, over to you, PK.

Thank you, Tracey, and thank you to all who have joined us for today's call. Amcor had a very active second quarter, and we're progressing well on three clear priorities; one, deliver on the base business; two complete the work required to close the announced merger with Berry Global; and three, make sure we are well prepared for a fast start and integration. With the base business, we start as always with safety on Slide 4. I'm incredibly proud of the commitment our teams demonstrate to safety every day. The safety and well-being of our people will always be our top priority, and we're constantly looking for opportunities to improve. In fiscal '25 to date, we have continued to deliver outstanding results. We achieved an industry-leading total recordable incident rate of 0.30 and 79% of our sites remained injury free for more than a year. Our key messages for today are on Slide 5. Q2 results were in line with expectations we set in October, as we continued to execute and deliver across key financial metrics. We are pleased to report our fourth consecutive quarter of sequential volume improvement and a return to sales growth, albeit marginal. Margins also continued to improve, helping drive a 5% increase in both adjusted EBIT and EPS on a comparable basis. This solid performance, along with our confidence in the second half leaves us on track to deliver against our full-year guidance, which we are reaffirming again today. And finally, as we continue to execute well on the underlying business, we're also highly focused on the unique opportunity we have to accelerate growth and enhance margin -- enhance earnings and cash generation through the previously-announced combination with Berry. Turning to Slide 6, on our Q1 earnings call in October, I outlined my strategy for…

Thanks, PK, and hello, everyone. Beginning with the Flexibles segment on Slide 11 and focusing on our fiscal Q2 performance, Q2 volumes were up 3% compared with last year, reflecting ongoing solid growth across all key geographies and a number of important end markets. Net sales also returned to growth, increasing by 1% on a comparable constant currency basis and higher volumes more than offset unfavorable price mix of approximately 2%, primarily related to lower healthcare volumes. As expected and discussed in prior earnings calls, we continued to see destocking in the healthcare in North America and Europe pharmaceuticals, which resulted in a headwind of approximately 1% to overall segment volumes. Compared to the fiscal first quarter, destocking abated and the related price mix headwind improved. And exiting the second quarter, we believe healthcare destocking is now largely behind us. Across the balance of our Flexibles portfolio, volumes were up 4%, reflecting solid demand across regions and in many product categories. In North America and Europe, second quarter demand remained solid, with volumes increasing mid-single digits in both regions, despite the negative impact of healthcare destocking. Topline growth was strong across the Asian region, reflecting price/mix benefits and mid-single digit volume growth, supported by strong demand in China and across Southeast Asia. In Latin America, volumes were broadly in line with last year's second quarter, with good growth in Colombia and Peru offset by demand in Argentina. From a product category standpoint, ready meals and premium coffee showed strong growth and dairy, meat, liquids and pet care were up low to mid-single digits. In healthcare, medical returned to growth. However, pharma volumes continued to be down low double digits compared with last year as a result of destocking, which as I mentioned earlier, is now largely behind us. Good earnings…

Thanks, Michael. A few closing remarks to summarize ahead of taking questions. We're executing well on the underlying business and are confident of our merger with Berry is a winning combination for all stakeholders. The path to completion is clear, with meaningful milestones already behind us. We remain highly focused on next steps to ensure we are setting the organization up for success, and we remain on track and confident the transaction will close around the middle of calendar year 2025. Kate, we're ready to take questions.

[Operator Instructions] Your first question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Good morning.

Good morning.

Hi, you talked about potential divestitures to, you know, strengthen the business. And I'm just wondering, do you expect that those could be impactful at all to synergy targets or timeline? And then, you know, as the divestiture opportunity, do you think it's larger than maybe you had expected, you know, late last year when you announced the deal or if there's any kind of color you can give us in terms of whether, you know, these are more likely Berry assets, Amcor assets or just any additional color you can give?

Yes. Thanks, Anthony. Look, I think you're talking about the portfolio pruning activities that I mentioned on a couple of calls earlier and also in the context of the Berry combination. For me -- for us, this is one of the additional levers that we can pull in order to orient the business towards a stronger, faster growing business organically and a business that is more attractive in terms of a higher and better margin quality. Now, with the combination with Berry, we have sort of embarked on a work stream that essentially puts the whole portfolio on the table. And we have started the conversations around that. So, we're on it and we're pretty much looking at everything. And as I've said before, the criteria are -- there are multiple criteria that would be -- that we would apply to this analysis, but two of them are stronger intrinsic organic growth and then margin quality would be the two outstandings. It's a little early for us to say, you know, where we land and what we're going to do. I think we need a little more time in order to come to a conclusion on it. But, you know, that is the key consideration here. I'm not sure it will have an impact on accelerating synergies and that's where you were coming from. I think it's really just about organic growth and making the business more attractive in terms of margin quality.

Your next question comes from the line of Keith Chau with MST Marquee. Please go ahead.

Hi, PK and Michael, thanks for taking my question. So, I just want to go back to a point around underlying demand. I think in the last quarter, there's, you know, much discussion or even over the last year about, you know, volume growth returning as destocking ends. So, it certainly seems as though that has happened. But in the last quarter, you talked about underlying consumer demand still being fairly tepid and seemingly in the second quarter, that hasn't changed too much. So, I'm just wondering if you can update our views in that respect, whether there has been any restocking in the period. And to what extent do you believe price mix will improve in the Flexibles division in the third quarter and fourth quarter? Is that going to be a positive outcome as that destocking in healthcare has ended? Thank you.

Yes, Keith, there's a couple of questions there. Let me try to sort them. So, first of all, when we look at our volume expectations, and the second quarter of this fiscal year wasn't an exemption, we did not really expect consumer demand to strengthen a lot. We always talk about the consumer demand sort of in the range of being flat to slightly down. And that is essentially what we've seen. Now, when we look at scanner data and we look at other, you know, reporting from customers, we triangulate all that, I think we get to the conclusion of the consumer having modestly softened in the second quarter versus the first one. And that's just the way it is and we've seen that too. On the other hand, you know, when I take a step back and look at our volume performance, I think it's important to calibrate against that environment. And we're actually pretty happy with the volume performance in the second quarter. Let me just highlight a few things here. We are up in the second quarter versus the first quarter and sequentially, we've almost seen a point of growth between Q1 and Q2. Flexibles is up 3%. Rigids is up overall 1%. When you look at the overall business, it was the fourth consecutive quarter of volume improvements or the third consecutive quarter of volume growth that we've seen. And then also, to your question on price mix or particularly mix, you know, we are sitting in a spot where we believe that the healthcare destocking is pretty much behind us at this point. We've seen some abating destocking in the pharma subcategory in the last quarter in Q2. Maybe there is a bit of lingering destocking that sort of carries forward into Q3, but…

Your next question comes from the line of George Staphos with Bank of America. Please go ahead.

Thanks so much. Hi, everyone. Good morning and good afternoon. A question on the momentum within Flexible Packaging. Can you talk to the degree to which incentives and/or FX might have impacted what otherwise would have been the EBIT conversion in Flexibles relative to the volume growth and whether EBIT itself in Flexibles was in line with your forecast? And as you're taking 2Q into 3Q, what kind of exit rate are you seeing on volume and conversion within Flexibles and the categories you serve? Thank you.

Well, I can speak to the latter part of that question with regards to volumes and then maybe Michael sort of addresses some of the financial components. You know, from a volume perspective, we're looking -- and that's across the business, we're looking at a first half that pretty much left us within our guidance range on volumes from low to mid-single digits. And that's -- therefore, overall, that's pretty much exactly where we expect it to be. And as we exit the second quarter into the back half, I have no reasons to expect anything else for the back half. So, we're sitting here today and we're saying -- we're confirming the volume guidance of low to mid-single digit for the full year and that's across the categories that we see, so Flexibles and Rigids.

Yes. And I think if we just talk about the profit performance of the business, I mean we were pleased with where it ended in the quarter. It was in line with expectations. We continue to see good leverage through the P&L from that volume improvement to the EBIT improvement. And, you know, the -- as we said earlier, we're still trailing a bit of negative mix, particularly on the healthcare side of things. So, you know, that will certainly improve. And I think from a cost standpoint as well, you know, the business has continued to focus on, you know, that margin quality, but also the cost-out. I guess one factor though is that clearly in the prior quarter -- in the prior year, you know, we had a really strong cost-out focus, particularly as we could see the impact of destocking pretty significantly earlier on in the quarter and we took a lot of effort to really manage that cost and limit the impact of that volume. I mean, this year clearly, you know, we continue to focus on cost, but we are lapping a much more difficult comp. And, you know, that means we have put a little bit of labor back into the business. I'm still getting that cost out, but have put labor back in just to ensure we don't miss any demand at all. So, you know, we are pleased with where the business ended up. You know, from an FX or incentive point, there's not really anything to speak to there. It wasn't a material impact.

Your next question comes from the line of Daniel Kang with CLSA. Please go ahead.

Good morning, everyone. So I understand that an integration planning event was recently held where both Amcor and Berry's staff joined to form global work streams. Can you just shed some color on the event? I'm interested in whether the leadership team managed to walk away with greater confidence and perhaps greater granularity on the target synergies. Any comments that you can share, particularly on the key line items of procurement, G&A and operational would be helpful. Thanks, PK.

Thanks, Daniel. Look, first of all, it's all accurate what you said. We are -- according to the three priorities, you know, we are also focusing on preparing the integration and we're expanding sort of our initiatives across a broader base of colleagues of two businesses in order to get ourselves ready to get out of the blocks fast once the acquisition closes. Now, what we're currently doing is we're essentially organizing ourselves. You know, the -- we're still -- it's still business as usual. We're still two different businesses. So, we can't address the integration. We can't start doing that, we can just plan it. But one of the things that we do according to our playbook that we have within Amcor, and Berry likewise has a lot of experience in integrating businesses, is we're setting ourselves up with an integration management office and underneath that, we're organizing ourselves with teams that will address the different work streams that will bring the two cultures together, but then also are focused on generating the synergies and -- so that we're able to deliver and outperform against that as the two companies come together. Now, to the extent we have an opportunity to look further into, you know, the estimates that we've made at the time, we do actually gain confidence in the synergy bucket that we put into the market of the $650 million, most of which is cost related and breaks down on the cost side, if I put the financial synergy opportunities aside, between procurement SG&A and then operations. So, overall comment is we're gaining more confidence in the numbers that we've put out there and that also applies for procurement, which is the biggest single item with $325 million. I just want to say, you know, just to dimensionalize the number, which sounds -- comes across as a big number, we have a spend between the two combined companies of about $13 billion. And if you look at the raw material side, that's about $10 billion. And if you sort of look at the procurement, you know, opportunities against that spend, we're sort of sitting around 3% of synergy capture, which we think is well aligned. So, very confident in the synergies at this point in time.

Your next question comes from the line of Ghansham Panjabi with Baird. Please go ahead.

Hi, good morning and afternoon, everyone. Thanks for taking my question. This is actually Matt Krueger sitting in for. You know, just wanted to follow up on the raw materials front. Can you provide some added details and an update around what you're seeing in the raw material and other input cost basket across your business, maybe give us an updated outlook for the year? And, you know, any thoughts on if or how this latest round of tariffs impacts your cost base or maybe even how you're going to conduct your business. Any details there would be great. Thanks.

Yes, sure. I can help with that, it's Michael here. Look, from a raw material standpoint, the first half was really pretty benign. You know, if you look at our numbers in the topline, in the revenue line, actually the raw material number for the first half was flat. So, you know, that tells you that the input costs overall were pretty flat for the first half. Q2, you know, again was a similar trend to, you know, Q1. There was a little bit of pass-through in Q2, but less than 1% in the topline and no impact in the earnings. And remember, we've got a broad base of goods across geographies, so they can move up and down at different rates. But generally, what we saw overall was the basket was pretty flat, perhaps down slightly, you know. And that included resins and liquids that were down in perhaps the low single digit range and then there were some offsets with things like aluminum, which were up what -- which were up in the mid-single digit range. You know, as we then -- so pretty benign. If we look forward, you know, into Q3, it's about as far as we look out, you know, I think with any confidence, I would say that it's probably a pretty similar view. Asia, Europe looking flat, perhaps in North America, you know, some slight increases, but overall, we'd expect the environment to be relatively benign in Q3. And after that, we'll see what happens. You know, from a tariff standpoint, you know, I think our business is very regional, you know, and in North America, particularly the level of imported goods is really very low, and typically, in, you know, specialty products that we can't get in this region. So, you know, from a tariff standpoint, you know, that would be factored into the cost and then passed through. So, we don't really see a lot of impact on our business just because of the regional or local nature from any tariffs impacting the cost base.

And I may add to that. On the tariff side, you know, the -- first of all, everything that Michael said is very true. We're a very regional business. And if anything, we've become more regional given the experience from the past. Prolonged supply chains have essentially sort of created risk on the service levels to your customers. So, we have even tried to shorten supply chains over the past. And in terms of the ability to pass through tariffs, when you think about it, you know, in some cases, we even have agreements with customers that would be based on indices that would allow us to pass on these additional costs. So I think we're in a spot where because we're regional, because we have some pass-through opportunities, we feel we are not immune, but somewhat robust against the tariffs.

Your next question comes from the line of Jakob Cakarnis with Jarden. Please go ahead.

Hi, Peter. Hi, Michael. I just wanted to ask just about the trajectory in the Health business. So, obviously, some improvement there. It sounds like it's pharma that's still dragging on volumes. Just wondering, as we move through the balance of the year, should the Berry merger complete, what's the exposure like to healthcare overall post-merger? And do you think that the momentum that you're seeing gives you further confidence that you can drive that organic sales growth in the combined entity as you plan to, please?

Yes, well, thanks for that question because I'm a big healthcare fan. So, I can take a step back and maybe help you, sort of how we look at that. First of all, I believe that healthcare is a category that's a real gem in our portfolio. And we've always said that, from an Amcor perspective we're excited about the combination with Berry also because we can only strengthen -- we can strengthen that business. Overall, when we combine the business, we're looking at about a $3 billion combined business in healthcare with really attractive exposures, which is also very complementary. On the Berry side, think about like multi-component delivery devices, for example, inhalers that are being brought to market and that is something that on the Amcor side we have -- we do not have in our portfolio. So, first of all, you know, we believe that healthcare is a gem while it has been sort of challenged over the last couple of quarters because of pretty much significant destocking. You asked about the destocking. We were essentially convinced that all of our categories have come to an end with the destocking by the beginning of calendar '24. The one that was left over really was healthcare because the destocking trend has started later and therefore lasted longer. As we then look at the first and the second quarter of this fiscal year, we've seen definitely some destocking in the first quarter where the subcategory of medical had already returned to some growth, albeit small, but in pharma, we were pretty much challenged still with the destocking. We have seen in the second quarter medical further improve and strengthen. On the pharma side, we've seen destocking abate. And again, we would now be in a spot where we'd say to keep things simple, that destocking in healthcare is also over. Now realistically, there's probably going to be some lingering destocking that carries over in the third quarter. I think I said that earlier today on a call -- on this call, but for the -- in the grand scheme of things, again, I think destocking is completely over. With that said, healthcare will return back to growth and we will get back to the historical growth rates, 3%, 4% of healthcare over time. That will also take away the mix impact that we have in the translation to the bottom line, and overall, pretty excited with that going forward.

Your next question comes from the line of Mike Roxland with Truist Securities. Please go ahead.

Thank you, PK, Michael, Tracey, Damon for taking my questions. You know, as you're proceeding through the due-diligence process with Berry, is there anything that stands out that you weren't expecting, upside, downside? My sense is that, you know, obviously some of the synergies do have some upside, given your comments, PK earlier. And then, secondly, just, you know, given that growth -- overall volume growth is slowly improving in the base Amcor business, is there anything you're doing maybe from a cost vantage point to help drive better profitability? Thanks.

Yes, Mike. So, I've just got to think about the first question. There were two questions here. Can you guys help me, what was the first one?

Anything that stands out in the due diligence...

Yes, thank you. So, due diligence, look, I would say, there are no surprises on our side, as we moved from announcing the deal a couple of months ago to where we're at today. But you've got to remember, it's business as usual at this point in time, right. So, you know, the data that we have available to look at is pretty much -- to a large extent really just the data that we had and that will significantly change only as we come to closing, which we expect to be in the middle of this calendar year, which has not changed versus what we've done before. So, you know, that's the answer to the first part of your question, is there anything positive or negative. We're pretty much in a spot where everything is as expected. And from a synergy perspective, you also mentioned that. And I think, yes, you know, we are becoming more confident in the synergies. So, that is that is all positive. Now, the second part of the question. I should have -- yes, Michael, do you want to take that?

Yes, I can take that one, PK, sure. No, thanks for that part of the question, Mike. Yes, look, on the cost side, we continue to focus on, you know, driving efficiency in our operations and our plants, managing the labor pool, you know, and flexing that to the volume as needed. We continue to look at, you know, the shift patterns and managing over time. And we've also still got some residual benefits to come through from the restructuring programs that we had in place as -- that we called out a couple of years ago in relation to offsetting some of those disposed earnings from Russia. So, you know, in the first half, you know, we've probably picked up about $7 million benefit there and we've probably got another $7 million or so to come in the second half. So, you know, overall, you know, it's a really strong cost focus and, you know, both operationally and still some benefits to come from the restructuring. So, you know, that's all -- and that's all factored into our guidance that we reaffirmed for the full year.

Your next question comes from the line of John Purtell with Macquarie. Please go ahead.

Hi, good day, Peter and Michael. Hope you're well. Look, just coming back to Berry, obviously -- and thanks for the comments there on healthcare, Peter. But obviously, Berry globalizes your Rigids business. I mean, what do you see as the sort of key benefits of that? And, you know, if you can also please touch on the growth outlook for closures and dispensing systems, and what that potentially gives you. Thank you.

Thanks, John. So, on the Rigids business, you said it globalizes our Rigids business. Let me be a little more specific about that and pull that apart, because I think it's really important. First of all, in terms of Quantum, our Rigids business, we summarize under the roof of rigid packaging, which is about a $3 billion business. And the Berry business has a containers and closures business, which is about a $7 billion business. Hence, the combination will get us to a really scaled player and multi-regions, and that's different from what we have today. Now, the key difference though is that we play only partly in the incomparable, call it, sub-segments. When I dissect our rigid packaging business, it -- I would split it generally between the North American beverage business, which we discuss quite often because it's a scale business, it's in beverage side. It sits in North America and it serves categories like isotonics, ready-to-drink tea, where we have some underlying challenges right now because it's a more discretionary category, as we've discussed many times. That's a scale, volume-driven business where we're very well positioned in North America on the Amcor side. The other part of that business is around specialty containers. That's a different business. It's also a scale business, but not as big as the North American beverage business, which serves a number of different categories and makes containers for those categories across the board. Now, the Berry side of the containers business is much more comparable to the specialty containers business of Amcor. That's where the complementarity comes in. In fact, Berry doesn't do anything on the North American beverage business. They don't have exposure to that type of a segment. So, we believe that is very positive for us because we were,…

Your next question comes from the line of Keith Chau with MST Marquee. Please go ahead.

Thanks so much for taking my follow-up question. Michael, just one for you. The last result, I think you guided to first half, second half split of 45, 55, which I think, based on what's been achieved in the first half, that split implies the bottom of the guidance range. So, I'm sorry to ask you a mathematical question, you know, but the top end does imply -- sorry, the midpoint does imply a slightly greater skew to the second half. So, given the top half now represents something more like 42%, 58%, how are you thinking about that split going into the full year, given what's happened in the first half or what's been achieved in the first half? Thank you.

Yes, okay. Look, I think as I said in my comments, I mean we are basing the phasing on the historical average is what we're expecting, you know, and that's a range, right. I think when I talked Q1 last time around, I was approximately, you know, 45% to 55%, but it can vary on the margin. I think, you know, as we've exited the first half, you know, it was right in line with our expectations, you know, and volumes in that low single digit range, the margins were, you know, continuing to expand and we saw the EPS, you know, growing at 5%. As we've kind of exited that, we look into January and then looked at the outlook, we feel really confident in the second half, which is why we've reaffirmed our guidance today and, you know, that as PK said, that implies that the second half low single digit to mid-single digit volume growth. You know, that's going to be a key driver obviously of the outcome of the year. And I think, you know, in terms of the range we've given you, the importance of the range, the volume particularly, as we get into the higher seasonal -- seasonality of the business, particularly in Q4, I mean we don't need a lot of volume improvement to really see strong leverage through the P&L, particularly in Q4 where the cost base is well covered off. That's the biggest quarter of the year, typically above 30% of earnings. And, you know, the other thing to take into account as well is clearly, we're expecting the mix improvement in the second half as a result of the healthcare business returning to growth and lapping that peak period of destocking last year. So, you know, from here, we said -- we've reaffirmed guidance. We feel pretty confident in that, and, you know, we'll update you in May as we work our way through the year.

Ladies and gentlemen, this concludes our question-and-answer session. I will now turn the call back to Peter for closing remarks.

Yes, thank you, Kate. Look, you know, given the overall environment, we feel pretty confident and we feel pretty good about the quarter that we've delivered, and I hope that came across. And so, again, we believe it's been a good quarter. The volume growth improved. We're pretty confident in the second half and we've reaffirmed guidance on the back of that. Thank you very much for your questions and your time. And I look forward or we look forward to having the opportunity to meet some of you at the upcoming conferences. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you, and have a great day.