Q1 2024 Amcor PLC Earnings Call

[music].

Hello, and welcome to the Amcor first quarter 'twenty 'twenty four results conference all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star one on your telephone keypad.

I'll turn the conference over to Tracey Whitehead head of Investor Relations. Please go ahead.

Thank you operator, and thank you everyone for joining M caused fiscal 'twenty four first quarter earnings call joining today, He's run Juliet at Chief Executive Officer, and Michael Casamento, Chief Financial Officer.

Before handing over a few items to note.

Our website amcor dot com under the investors section, you'll find today's press release and presentation, which we will discuss on this call. Please.

Please be aware that we will also discuss non-GAAP financial measures and related reconciliations can be found in that press release and presentation.

Remarks will also include forward looking statements that are based on management's current views and assumptions.

Slide in todays presentation lists several factors that could cause future results to be different than current estimate.

Reference can also be made to <unk> 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.

Thanks, Tracey and thanks, everyone for joining Michael and myself today to discuss <unk> first quarter results for fiscal 2024 will begin with some prepared remarks before opening for Q&A.

As seen on slide three amcor continues to be an industry leader in safety with a recordable case frequency rate that has trended significantly downwards over many years in our first quarter, 65% of our sites around the world were injury free for the past 12 months with more than 30% injury free for three years or more.

Safety is deeply embedded in <unk> culture, and providing a safe and healthy working environment as the number one focus for our global teams.

Turning to our key messages on slide four.

First we delivered our first quarter results in line with our expectations. Despite a challenging demand environment characterized by continued weak consumer demand and ongoing customer destocking.

Against this backdrop, our teams executed well and remained focused on managing the areas under their immediate control.

Second the first quarter performance puts us on track to deliver against our full year guidance, which we are reaffirming today.

Our expectations for phasing through the two halves of the fiscal year have not changed and we continue to expect adjusted EPS for the second half of fiscal 'twenty four to grow by mid single digits over last year on a comparable constant currency basis.

As a reminder, there are several reasons why we expect a stronger second half, including continued benefits and increased earnings leverage from ongoing price and cost actions.

Additional benefits from structural cost initiatives building through the year, a reduction in interest expense headwinds and favorable comparisons to the prior year's volume performance.

Our third key message is we're making significant strides in our sustainability efforts within our own operations and in the design of our products are.

Our commitment to sustainability and the creation of a circular economy for packaging represents one of our most promising avenues for growth as we enable our customers to meet consumer demand for more responsible packaging.

And fourth we remain confident in our long term growth and value creation strategy, the strength of our market positions and underlying business, our proven execution capabilities and our consistent capital allocation framework collectively make a compelling case for investment in amcor.

Moving to slide five for a summary of our financial results.

September quarter financial performance was in line with our expectations as we continued to take proactive cost and price actions to align the business with market dynamics, including ongoing inflation and continued weak and volatile volumes.

Sales were 6% lower than last year on a comparable constant currency basis, which reflects price mix benefits of approximately 2% offset by an 8% decline in volumes, which was within the range. We anticipated for the first half of fiscal 'twenty four.

As expected volume weakness persisted and was broad based through the September quarter due to a combination of lower consumer demand and continued customer inventory destocking.

Fiscal first quarter adjusted EBIT of $358 million was 5% lower than last year on a comparable constant currency basis.

Benefits from ongoing cost actions and price and mix benefits were more than offset by the weaker volumes.

And our teams drove working capital improvements, which resulted in free cash flow being well ahead of the same period last year.

We expect to deliver strong cash returns to shareholders. This fiscal year with returns of approximately $200 million in the first quarter up more than 10% over last year through a combination of share repurchases and a growing dividend, which the board increased to $12.05 per share.

I'll turn it over now to Michael to provide some further color on the financials and our outlook.

Thanks, Ron and Hello, everyone.

Turning to the flexible segment performance on slide six.

Net sales were down 8% on a reported basis, which includes a favorable impact of 3% related to movements in foreign exchange rates and the unfavorable impact of 2% related to the pass through lower raw material costs.

On a comparable constant currency basis, net sales were down 6%, reflecting.

St lower volumes, partly offset by price mix benefits of approximately 2%.

As the business continues to take pricing actions to recover inflation.

First quarter volume trends remained similar to last quarter with all regions continuing to be impacted by lower consumer demand and destocking.

Volumes across North America, and Europe were down high single digits with Europe, a little softer than North America.

Volumes in Latin America were also down high single digits and in Asia volumes were broadly in line with last year as continued growth in India and a return to positive volume growth in China, offset lower overall volumes in southeast Asia.

The impact of Destocking across the flexible business was similar to last quarter accounting for approximately one third of total volume declines.

By end market, we continue to stay soft demand and destocking impacted categories, including protein coffee liquid beverage and health care.

Pet care in Confectionary categories remained strong in key markets with volume growth delivered in the quarter.

Adjusted EBIT was down 5%.

And comparable constant currency terms for the quarter, reflecting favorable operating cost performance and price mix benefits offset by the lower volumes.

Turning to rigid packaging on slide seven.

Reported sales were 6% lower than last year.

The favorable impact of 1% related to movements in foreign exchange rates and the unfavorable impact of 1%.

<unk> to the pass through of lower raw material costs.

On a comparable constant currency basis, net sales were 6% lower than last year.

It's price mix benefits of approximately 1% were offset by a 7% decline in volumes.

In North America volumes in both beverage and specialty containers business continued to be impacted by lower consumer demand.

Similar levels of customer Destocking as experienced last quarter.

In the beverage business overall volumes were down 9%, although mix trends were favorable.

In specialty containers volume growth and food was offset by weaker volumes in health care and home and personal care.

In Latin America, while market demand was somewhat softer across the region. Our business is benefiting from new business wins and overall volumes were up mid single digits compared with last year.

The businesses in Brazil, and Colombia delivered strong volume growth offsetting lower volumes in Mexico.

Adjusted EBIT was 6% lower than last year on a comparable constant currency basis.

Reflecting lower overall volumes, partly offset by price mix benefits and favorable cost performance.

In terms of cash flow and the balance sheet on slide eight.

Our adjusted free cash flow performance was in line with our expectations and meaningfully better than last year, enabling us to reaffirm our full year cash flow guidance, which I'll come back to shortly.

The cash flow improvement of more than $170 million compared to the first quarter of fiscal 2023, mainly reflects our focused inventory reduction efforts.

Which have resulted in a decrease of more than $500 million since the peak in November 2022.

We remain highly focused on working capital performance, which is particularly critical in this environment of continued inflation and rising interest rates rising interest rates.

We also continue to return cash to shareholders purchasing approximately 3 million shares during the first quarter for a total cost of $30 million.

And consistent with our comments in August we expect to allocate a title of at least 70 million towards share repurchases in fiscal 'twenty four.

In terms of the balance sheet, we maintain a strong investment grade credit rating with leverage at three three times in line with our expectations at this time taking into account the usual seasonality of cash flows and the short term impacts of cycling the divestiture of our Russian business earnings and higher working capital levels.

We expect leverage will decrease to approximately three times by the end of the fourth quarter.

Turning to our outlook on slide nine our Q1 performance was in line with our expectations and we are reaffirming our full year guidance for adjusted EPS of <unk> 67 to 71 per share.

We continue to expect the underlying business to contribute organic earnings growth in the plus or minus low single digit range.

And share repurchases will result in a benefit of approximately 2%.

The U S. Dollar has strengthened slightly since August and we now anticipate currency translation to rollout, resulting in a benefit of up to 2%.

This is expected to be offset by negative impact of approximately 3% related to the style of our three plants in Russia in December 2022.

And we also expect a negative impact of approximately 6% from higher interest and tax expense.

Our expectations for interest and tax expense for the full year remain unchanged with interest in the range of $320 million to $340 million and a tax rate in the range of 18% to 20%.

In terms of cash flow, we are trending better than the first quarter last year and we continue to expect.

Significant adjusted free cash flow in the range of $850 to $950 million in fiscal 'twenty, four representing growth of up to $100 million over last year.

Our plan to repurchase at least $70 million of AMCOL shares in 2024 is unchanged and we continue to pursue value, creating M&A opportunities.

Turning to slide 10, Amcor has a proven track record of strong and consistent long term and in HRS as noted on our call in August it is important to call out that fiscal 'twenty 2020, full phasing of comparable earnings growth is not expected to align with prior years.

Consistent with our comments from last quarter, we anticipate challenging market dynamics.

Assist in the near term.

<unk> and similar mid to high single digit volume declines through the December quarter.

<unk> combined with the unfavorable impact of higher interest expense, which is expected to moderate in the second half.

Guidance for the first half is unchanged.

Paired with last year, we expect that adjusted EPS for the six months of fiscal 2024 will be down in the high single digit to low double digit range on a comparable constant currency basis.

For the second quarter. This implies adjusted EPS and EBIT in absolute terms will be broadly in line with or marginally lower than the September quarter just finished.

As Ron mentioned earlier, our confidence in delivering mid single digit comparable constant currency earnings growth in the second half of fiscal 'twenty, four and resuming a long term trend of high single digit earnings growth. Shortly thereafter is supported by visibility to several known second half factors.

First we have the benefit of approximately $35 million from structural cost saving initiatives that builds through the year.

We have increased earnings leverage, resulting from ongoing benefits of price and cost actions taken.

Third as I noted earlier, our reduced interest headwind.

And fourth we expect that customer inventories will have largely normalized as we progress through the second half and we will benefit from favorable prior year volume comparator.

Finally, and also consistent with our comments in August we do not need to see a significant change in the demand environment to return to solid earnings growth in the second half and beyond.

So with that I'll turn the call back to Ron to provide some longer term comments.

Thanks, Michael before we open the call to questions I want to provide a few words on the building blocks that inform how we think about growth over the longer term and then finish with a brief preview of our 2023 sustainability report, which will be released in the coming days.

Looking at Slide 11, we have multiple drivers that have enabled us to deliver solid and sustainable earnings growth over the longer term, including opportunities in priority categories emerging markets and through innovation.

These have not changed and collectively give us confidence in our ability to deliver future growth in line with our historic trend rates.

Turning to slide 12, and some highlights from our forthcoming sustainability report, which covers the significant strides we've made in product development and operational sustainability.

Sustainability provides meaningful opportunities to differentiate and drive growth and value. This is particularly important in today's landscape as consumers focused on the critical need for more sustainable high performance packaging solutions and as customers increasingly look to work closely with responsible sustainability focused partners.

Starting with our own operations since launching <unk> program 15 years ago, we've diligently worked towards reducing our greenhouse gas emission intensity and have achieved a cumulative reduction of more than 40% against our 2006 baseline.

Along the way we've also increased our ambition and committed to net zero emissions by 2050 in line with the science based targets initiatives.

In fiscal 2023, we delivered an annual reduction in absolute emissions of 10% through a range of measures, including an increasing focus on the use of renewable electricity.

In addition, the carbon related objectives, we maintain robust targets for reducing water and waste 100% of our sites have a water management plan in place and 143 of our sites have achieved zero waste to disposal certification, which is an increase of around 20% in the last 12 months.

Transitioning to slide 13, we also continued to make significant progress in supporting the development of circular systems and what we believe are the three requirements for responsible packaging package design waste management infrastructure and consumer participation.

<unk> industry, leading innovation capabilities position us well to develop the more sustainable and high performing packaging consumers are looking for and we believe this is one of our greatest opportunities for growth and differentiation.

Today, almost all of our rigid packaging and specialty carton portfolios are fully recyclable.

Looking at our flexible portfolio, 61% of fiscal 2023 sales were recycle ready. According to the Ellen Macarthur Foundation definition, meaning these solutions are designed to be recycled using current technologies, where infrastructure is available.

Additionally, another 28% of sales had recycle already alternatives available, providing a meaningful growth opportunity when our customers are ready to transition more of their portfolios to sustainable solutions.

In total 89% of our flexible packaging portfolio is designed to be recycled or has a recycle rady alternative.

<unk> six percentage point increase over fiscal 'twenty two.

Our use of recycled content also continues to grow increasing by 29% over fiscal 'twenty, two reflecting our commitment to work closely with customers to reduce use of Virgin materials.

Over the past four years, we've more than tripled our use of recycled material and we're confident we will achieve 30% recycled content across our portfolio by 2030.

We also continued to leverage our position as an industry leader and trusted resource to help our customers navigate their sustainability journey.

As an example in fiscal 'twenty three we hosted several EMCORE webinars, which were attended by hundreds of customers and covered topics such as the use of recycled content in food contact and health care packaging and the impact of evolving regional regulations on packaging options.

Through these efforts, we're reinforcing our value proposition in helping customers accelerated conversion of their packaging portfolios to comply with emerging regulations and to meet their own sustainability goals.

We take pride in the strides we've made across all aspects of our sustainability journey, we eagerly anticipate the opportunities ahead, which will continue to differentiate amcor and also advance our growth objectives, all while contributing to the creation of a circular economy for the packaging industry.

In summary on slide 14 fiscal 'twenty four has started in line with our expectations.

We have reaffirmed our earnings and cash flow guidance today, as we continue to have confidence and visibility to solid earnings growth in the second half.

We're making good progress on our sustainability agenda, and we remain focused on our strategy to deliver long term growth and value creation.

So operator, we're now ready to open the call for questions.

So if you have a question. Please press star one on your telephone keypad to withdraw your question simply press Star one again in the interest of time, we would like to remind participants to limit their questions to one and then to rejoin the queue for any follow ups.

Your first question comes from the line of Ghansham Panjabi with Baird. Your line is open.

Thanks, operator, and good day everybody.

Brian could you give us a bit of a sense as to what your base cases for volumes for fiscal year, 'twenty, four and I'm, just trying to get a sense as to the sequencing beyond.

Beyond the first quarter, which was down 8% would it be sort of <unk> before you hit that inflection point on a year over year basis.

Got it.

Thanks for the question Ghansham look firstly as we entered the year, we flagged that we expected volumes to be down mid to high single digits for the first half and that's exactly what we saw in the first quarter and we expect a similar trajectory for the second quarter as well as we look forward to the second half, we do expect that trajectory to improve so we would expect.

That the Destocking will abate as we get past year end.

And as we start to cycle several quarters of inventory reductions, we would expect that impact to start to.

Moderate.

And we would expect for the second half volumes more reasonably or flattish flat to up plus or minus.

Low single digits.

I think it's more reasonable to expect that the trajectory will improve now exactly the rate at which that trajectory improves in the second half is difficult to predict.

Certainly as we get into the fourth quarter.

<unk> get a lot easier.

And and we would expect things to be improving as we as we exit the year.

Okay. Thanks for that Ron and I am just trying to understand the divergence also between volumes, which are quite a bit lower.

<unk> improved price mix as yet.

Established over the last couple of quarters.

State ability of that dynamic.

That typically during periods of weaker volumes, there tends to be some sort of a trade down and actually showcasing the opposite so more color on that please.

Look mix over a longer period of time over multiple years as a major source of earnings leverage for us and has been over a long period of time as we emphasize higher value segments, both product segments and market categories.

<unk> is a very important part of our playbook for this year on a full year basis, we expect mix to be more or less neutral.

We've had a reasonably good start in the first quarter with positive mix in both segments.

Would expect that probably will we will continue in the second quarter, but for the full year.

We would expect that might normalize a little bit.

The reason for that is some of the segments that are higher value have declined at a lower rate than some of the lower value categories.

But as we look forward into the second half, we think that the health care Destocking will continue.

And ultimately that will balance out the positive first quarter. So all up relatively neutral for fiscal 'twenty four but on a multi year basis mix is absolutely part of it.

The earnings algorithm going forward.

Your next question comes from the line of Daniel Kang with CLSA. Your line is open.

Good morning, everyone.

I guess the first question from me is on Destocking cycle.

To assist in the quarter are you seeing any evidence of signs of.

Destocking easing as we walk into the second quarter, perhaps you can comment on what you're seeing.

On customer stock levels.

As well.

Look I think we're using the term destocking I think what we're seeing is more broadly as just inventory reductions destocking might imply that inventories.

It started out at a higher level and I think thats certainly true in some categories that were subject to more of the supply chain constraints and raw material shortages over the last 12 months to 18 months. There certainly were some inventory some inventory.

Accumulation, but.

I think we've got a few different dynamics that are driving the inventory reduction trends first is.

For those categories that started at a high level, obviously, they're working down the excess.

At a time when consumer demand has softened.

And also.

Carrying cost of inventory is now much higher than it's been in a long period of time. So I think that we're seeing a number of companies, including amcor try to drive inventories down to lower levels than they've been in quite some time and I know that we are certainly on that on that path. So I don't expect that trend to.

To be beyond to be past us in the second quarter, particularly as we're heading towards the year end.

And cash flow at year end becomes an important metric that companies are driving towards so we would.

Expected the Destocking will abate in the second half, but not in the second quarter.

Got it thanks, Ron Secondly.

I'm just interested in the progress.

Our new packaging products and light and Thai baht et cetera realize it's early days, but can you comment on the volume growth and customer adoption that you're seeing in the pricing premium that you're shading.

Yes look we're really excited about some of those platform products that you mentioned <unk> light, which is a reportable a recycle ready recordable structure and fiber, which is a paper based.

<unk>.

<unk> Sky, which eliminates PVC and PVC from blister packaging, we think that we've got some really special products there with a really compelling value proposition for customers that are trying to drive their own sustainability agenda.

It is early days.

Several of those products, though are are generating real sales. So am Primo, which is also a recycle ready.

Alternative.

And sky fiber, they're all each generating sales in the tens of millions of dollars at.

Low tens of millions of dollars, but real meaningful sales am sky. It's early days and it's primarily oriented to the pharma industry. So the qualification period is a bit longer.

But we are in active trials with a whole range of customers on that one as well. So we continue to be really excited about those platforms.

That you've asked about.

Your next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open.

Hi, yes. Thank you good afternoon.

I was hoping maybe first talk about.

Just the performance in the quarter from the.

The difference between volume and comparable constant currency operating profit growth is.

Very little volume deleverage in the period.

To contrast, the fiscal 'twenty three experienced maybe one deal a little more color on kind of how you were able to narrow the gap with volumes down mid to high single digits kind of keeping the profit declines at narrow.

Yes.

It's just been really aggressive pulling the cost lever it really aggressively and we continue to do that through the back end of fiscal 'twenty three and into the start here in the first quarter of fiscal 2004. So you might recall in August we talked about the cost actions that we took in fiscal 'twenty, three where we reduced costs by over two.

<unk> hundred million dollars, we've reduced head count by over 200 people, we had pulled their procurement lever really hard we had cut overheads all of that continued in the first quarter and actually accelerated during the first quarter coming off a year, where we took $200 million of cost out in the first quarter, we took another $70 million of cost out.

<unk> the first quarter of the previous year.

And so that's really resulted in improved earnings leverage.

And much I'd say are much more.

Dynamic ability to flex costs in the face of weaker volumes.

Okay.

Okay I appreciate the color I'll keep it to one question.

Operator: Hello and welcome to the Amcor First Quarter 2024 Results Conference. 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.

Okay. Thanks, Adam.

Your next question comes from the line of George Staphos with Bank of America. Your line is open.

Hi, everyone. Good morning, good afternoon, thanks for taking.

Operator: If you would like to ask a question during this time, simply press star one on your telephone keypad.

My questions I, just wanted to make sure. It's two questions per one question for I don't want to overdo the quota here.

Tracey Whitehead: I'll now turn the conference over to Tracey Whitehead, head of investor relations. Please fill our heads. Thank you operator and thank you everyone for joining Amcor's fiscal 24 first quarter earnings call. Joining today is Ron Delia, our chief executive officer and Michael Casamento, our chief financial officer. Before handing 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.

Yes, George for you it's too.

Okay. Okay.

I'll try to keep them. Good then so I guess the first thing I wanted to ask is.

In an environment, where we're still to some degree waiting for customers your customers to begin promoting more aggressively to drive volume. If you agree with that premise are you starting to see that.

And how does that reconcile with your wanting.

Tracey Whitehead: Please be aware that we'll also discuss non-gap financial measures and related reconciliation can be found in that press release and 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. Reference can also be made to Amcor's SEC filing, including our statements on form 10K and 10Q for further details.

To push more innovative new products, new products sustainability, which are typically going to have a higher price point.

Who is winning that tug of war right now as you think about it and are we seeing more promotional activity.

Look it's anecdotal at best George I mean, there is I think a general recognition across the customer base that the price lever has been pulled really hard and you see that from the.

The results of a range of consumer companies that price has been a real driver of revenue growth more so than volumes and maybe that maybe those two variables can be brought back into better balance over time and you do hear anecdotally.

More customers talking about re prioritizing volume.

Tracey Whitehead: Please note that during the question and answer session, we request that you limit to 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.

Or balancing their mix a little bit more towards volume we.

We need to see it and we haven't seen it yet and so we're not setting the business up on the expectation that that happens in fact, our second half.

Ron Delia: Thanks Tracey and thanks everyone for joining Michael and myself today to discuss Amcor's first quarter results for fiscal 2024. We'll begin with some prepared remarks before opening for Q&A. As seen on slide three, Amcor continues to be an industry leader in safety with a recordable case frequency rate that is trended significantly downwards over many years. In our first quarter, 65% of our sites around the world were injury-free for the past 12 months, with more than 30% injury-free for three years or more.

Earnings uplift that we're expecting is not at all levered to an improved demand environment.

And is not at all predicated or dependent on consumers.

A more active approach to promos.

Thanks, Ron and the second question broadly can you talk a little bit about the momentum you apparently are seeing in protein packaging.

Ron Delia: Safety is deeply embedded in Amcor's culture and providing a safe and healthy working environment is the number one focus for our global teams. Turning to our key messages on slide four. First, we delivered a first quarter result in line with our expectations, despite a challenging demand environment characterized by continued wheat consumer demand and ongoing customer destocking. Against this backdrop, our teams executed well and remained focused on managing the areas under their immediate control.

A new high barrier win that you highlighted in one of the slides you have your recycle ready.

Ron Delia: Second, the first quarter performance puts us on track to deliver against our full-year guidance, which we are reaffirming today. Our expectations for phasing through the two halves of the fiscal year have not changed. And we continue to expect adjusted EPS for the second half of fiscal 24 to grow by mid-single digits over last year on a comparable constant currency basis. As a reminder, there are several reasons why we expect a stronger second half, including continued benefits and increased earnings leverage from ongoing price and cost actions.

<unk> tight package.

Is there a way to put a quantum size, what kind of momentum youre seeing.

What kind of incremental revenue youre getting and broadly why you are gaining this momentum in the market.

Given that you are the smaller player in the market.

Thanks, and now I'll be back if there's time later on.

Okay.

Look I think it's it's the early innings of our journey on proteins in particular, our journey as a full service solutions provider in meat and protein packaging, which includes the ability to offer equipment now as a result of the acquisition that we made earlier this year in modal.

It's early innings I think that we are picking up.

Some modest pieces of business, along the way, but I would also point out that meat sales have been weak. We're in a we're in a down part of a down cycle or a trough, let's say.

Ron Delia: Additional benefits from structural cost initiatives building through the year. Our reduction in interest expense headwinds and favorable comparisons to the prior year's volume performance. Our third key message is we're making significant strides in our sustainability efforts within our own operations and in the design of our products. Our commitment to sustainability and the creation of a circular economy for packaging represents one of our most promising avenues for growth as we enable our customers to meet consumer demand for more responsible packaging.

Our low point of the cycle in beef in particular, and so meat sales have actually been weak across the company in the first quarter.

It's a long it's a long game and we're in the early innings and so I would say that we're really confident in the value proposition that we have and that we're building we think we've got.

Some really special films and we think we've got a really special comprehensive offering that includes now equipment and service.

Ron Delia: And fourth, we remain confident in our long-term growth and value creation strategy. The strength of our market positions and underlying business, our proven execution capabilities and our consistent capital allocation framework collectively make a compelling case for investment in Amcor.

But it's very very new and very recent <unk> acquisitions, only a few months.

A few months old.

Your next question comes from the line of Sam <unk> with Citi. Your line is open.

Morning, Thanks for taking my questions.

Ron Delia: Moving to 5.5 for a summary of our financial results. September quarter financial performance was in line with our expectations as we continued to take proactive cost and price actions to align the business with market dynamics, including ongoing inflation and continued week and volatile volumes. Sales were 6% lower than last year on a comparable constant currency basis, which reflects price-mixed benefits of approximately 2% offset by an 8% decline in volumes, which was within the range we anticipated for the first half of fiscal 24.

Just a simple one on the balance sheet.

Just wondering if we get that second half volume stabilization with that result.

Net debt at side, you're right Joe.

Would there be an optimal seasonality and the unwinding of working capital to bring that debt irrespective of the colleagues.

Decline.

Yes. Thanks for the question sounds I can take that one yes look I mean, we finished the.

For the quarter with net debt of $6 <unk>.

$6 6 billion in leverage at three three times, which was right in line with where we expected it to be.

Ron Delia: As expected, volume weakness persisted and was broad-based through the September quarter due to a combination of lower consumer demand and continued customer inventory destocking. Fiscal first quarter adjusted evit of $358 million was 5% lower than last year on a comparable constant currency basis. Benefits from ongoing cost actions and price-mixed benefits were more than offset by the weaker volumes. And our teams drove working capital improvements, which resulted in free cash flow being well ahead of the same period last year.

That takes into account.

The relatively normal seasonality of the cash flows from fourth quarter to Q1, we typically see a tick up in leverage.

Ron Delia: We expected to deliver strong cash returns to shareholders this fiscal year, with returns of approximately $200 million in the first quarter, up more than 10% over last year, through a combination of sharey purchases and a growing dividend, which the board increased to 12.5 cents per share.

Versus we were at three times in June.

The other factors impacting leverage really on the two temporary impacts firstly when.

We're lapping now three quarters of divested Russia earnings.

And thats being reflected in the.

In the last 12 months EBITDA and Thats ahead of us getting the benefit of the restructuring.

Which is going to start come through an H two sided youll start to see that improvement absolutely and then the other the other one is really the higher the normal working capital levels, we've been driving inventory down but at the same time payables has come down at a faster rate really just on the back of the lower demand environment. So again.

Michael Casamento: I'll turn it over now to Michael to provide some further color on the financials and our outlook. Thanks, Ron, and hello everyone. Turning through our flexible segment performance on slide 6, net sales were down 8% on a reported basis, which includes a favorable impact of 3% related to movements in foreign exchange rates and an unfavorable impact of 2% related to the past through a lower raw material cost. On a comparable constant currency basis, net sales were down 6% reflecting 8% lower volumes, partly offset by price-mixed benefits of approximately 2%, as the business continues to take pricing actions to recover inflation.

We'd expect that to start to normalize as we get into the second half an hour.

We will get we will get the leverage back to three times by the end of June So thats kind of the way, we see it and as we look forward from there there'll be further.

Opportunity for improvement, particularly in the working capital is it is it continues to normalize and as we cycled through the full 12 months of the.

The Russia and the benefits from the restructuring that we're going to get into the P&L.

We're on track there.

Got it and just maybe a follow up equal at length about your volume expectations for the year, maybe thoughts on.

Michael Casamento: First quarter volume trends remained similar to last quarter, with all regions continuing to be impacted by lower consumer demand and destocking. Volumes across North America and Europe were down high single digits, with Europe a little softer than North America. Volumes in Latin America were also down high single digits, and in Asia, volumes were broadly in line with last year, as continued growth in India and a return to positive volume growth in China offset lower overall volumes in Southeast Asia.

Pricing kind of ex pass throughs, given end market weakness.

Ongoing de stocking.

Well look our pricing strategy has been first and foremost to compensate for inflation and.

That's our approach is simple.

As simple as that we have had inflationary pressure on the cost base for <unk>.

12 to 18 months now and as a result.

<unk> taken pricing.

As a high priority for me from an industry leadership perspective, and certainly prioritized price and inflation recovery.

Michael Casamento: The impact of destocking across the flexible's business was similar to last quarter, accounting for approximately one-third of total volume decline. By end market, we continue to see soft demand and destocking impact categories including protein, coffee, liquid beverage and health care. Pet care and confectionery categories remain strong in key markets with volume growth delivered in the quarter. Adjusted EBIT was down 5% in comparable constant currency terms for the quarter for reflecting favorable operating cost performance and price mixed benefits offset by the lower volumes.

Over volume inflate rates of inflation.

Are starting to ease we haven't seen.

Large parts of the cost base go through experienced decreases yet, but the rate of inflation has eased and so our pricing the pace of our pricing will use as a result and beyond.

Beyond that our pricing approach is really just a price for value. If we have a differentiation differentiated value proposition there is an opportunity to generate a positive price.

But that's.

That's something that needs to be earned everyday in the marketplace.

Michael Casamento: Turning to rigid packaging on slide 7 reported sales were 6% lower than last year, including the favorable impact of 1% related to movements in foreign exchange rates and the unfavorable impact of 1% related to the past through a lower raw material cost. On a comparable constant currency basis, net sales were 6% lower than last year, as price mix benefits of approximately 1% were offset by a 7% decline in volumes. In North America, volumes in both the beverage and specialty containers business continued to be impacted by lower consumer demand and similar levels of custom destocking as experienced last quarter.

Your next question comes from the line of Mike <unk> with <unk> Securities. Your line is open.

Thank you, Ron Michael Tracy and David for taking my questions.

Question just had one question really.

The company has made solid progress streamlining the portfolio.

Another $70 million of savings this quarter closing plans realigning production head count reduction.

When volumes begin to improve should we expect to see a reversal of this and you're putting more capital to work in new plan, increasing head count will really does your existing footprint understands today have enough excess capacity to absorb incremental volumes without any additional investment.

Michael Casamento: In the beverage business, overall volumes were down 9%, although mixed trends were favorable. In specialty containers, volume growth in food was offset by weak volumes in healthcare and home and personal care. In Latin America, while market demand was somewhat soft or across the region, our business is benefiting from new business wins and overall volumes were up mid-tingle digits compared with last year. The businesses in Brazil and Colombia delivered strong volume growth offsetting lower volumes in Mexico.

Yes, it's a great question.

I think the short answer is we're going to be well set up when volumes come back and I think we're going to get even stronger earnings leverage as volumes return and we're taking really two sets of actions on the cost side. So the first the $70 million that I referred to earlier that you just referenced.

Michael Casamento: Adjusted EBIT was 6% lower than last year on a comparable constant currency basis, reflecting lower overall volumes partly offset by price mix benefits and favorable cost performance. In terms of cash flow on the balance sheet on slide 8, our adjusted free cash flow performance was in line with our expectations and meaningfully better than last year, enabling us to reaffirm our 4-year cash flow guidance which I will come back to shortly. The cash flow improvement of more than $170 million compared to the first quarter of fiscal 2023 mainly reflects our focused inventory reduction efforts, which have resulted in a decrease of more than 500 million since the peak in November 2022.

Is really ongoing productivity.

Oriented benefits, where we're taking shifts out.

<unk> head count driving procurement.

Optimizing the overhead and SG&A part of the business.

Kind of a steady state, but but aggressive belt tightening I would say that's one.

One form of cost reduction and I don't think a lot of that now some of it will come back obviously as volumes come back you need to add you might need to add shifts, but we will be in a much better position from a leverage perspective as volumes return. So that's on that side. The second stream of cost takeout relates to more structural initiatives, which are more than restructured.

Michael Casamento: We remain highly focused on working capital performance, which is particularly critical in this environment of continued inflation and raising interest rates. We also continue to return cash to shareholders, purchasing approximately 3 million shares during the first quarter for a total cost of $30 million, and consistent with our comments in August, we expect to allocate a total of at least 70 million towards sharey purchases in fiscal 24. In terms of the balance sheet, we maintain a strong investment grade credit rating with leverage at 3.3 times in line with our expectations at this time, taking into account the usual seasonality of cash flows and the short-term impacts of cycling the divestiture of our Russian business earnings and high working capital levels.

<unk>.

The restructuring type.

Our plant closures and more permanent and more deep cutting overhead reductions.

We really haven't seen the benefits yet from those initiatives those will start to build in the second half as Michael referred to.

Earlier, we expect to get about $35 million of benefits from more structural.

Initiatives in the second half.

And those also will be long lasting and sustainable because we're going to be taking out <unk>.

Several plants in the network that.

We can compensate for with with the remaining footprint and in many cases, when we close a facility we relocate the productive assets into a another facility and we don't really take capacity out necessarily so I think we're going to be well positioned when and if volumes return.

Michael Casamento: We expect leverage will decrease for approximately 3 times by the end of the fourth quarter. Turning to our outlook on slide 9, our Q1 performance was in line with our expectations and we are reaffirming our four-year guidance for adjusted EPS of 67-71 cents per share. We continue to expect the underlying business to contribute organic earnings growth in the plus or minus low single digit range and sharey purchases will result in a benefit of approximately 2%.

Thanks, Ron you can look at it and good luck in the second quarter.

Your next question comes from the line of Richard Johnson with Jefferies. Your line is open.

Thanks, very much Ron can I, just return to the subject of price and in particular the.

U S protein markets I'm interested in the comments, you're making I'm just trying to reconcile that with what other than the market is saying and they're referring to significant out of the capacity in that market, which makes sense given how weak. The end market is which is leading to the acute price pressure because of that unused capacity.

Michael Casamento: The US dollar has strengthened slightly since August and we now anticipate currency translation to result in a benefit of up to 2%. This is expected to be offset by a negative impact of approximately 3% related to the sale of our three plants in Russia in December 2022. And we also expect a negative impact of approximately 6% from higher interest and tax expense. Our expectations for interest and tax expense for the four-year remain unchanged, with interest in the range of $320 to $340 million and a tax rate in the range of 18 to 20%.

Be interested to get your thoughts on that.

Yes, I don't know that the pricing.

Pressure or the intensity of the competition is any more so at the moment in that segment than it has been in the past or that it will be in the future.

I remember as well that the assets that are deployed against that segment.

Fungible across a range of categories.

So we have film assets that produce into the protein market also produce specifications for dairy.

Michael Casamento: In terms of cash flow, we are trending better than the first quarter last year and we continue to expect significant adjusted free cash flow in the range of $850 to $950 million in fiscal 24 representing growth of up to $100 million over last year. Our plan to repurchase at least 70 million of Amcor shares in 2024 is unchanged and we continue to pursue value creating M&A opportunities. Turning to slide 10, Amcor has approved and track record of strong and consistent long-term earnings growth.

And a number of other segments as well so.

Certainly not a market that we look at as being overly overly capitalized are having much excess capacity.

Okay.

Okay.

And then as you sort of spread that through the you asked around the different categories. I mean cannot can I extrapolate from your comments around how the <unk> seeing positive price mix trend, that's really across all the categories or are there any areas, where it prices starting to you're starting to give back price, which inevitably you would expect given given how far prices gone at some point that will normalize.

Michael Casamento: As noted on our call in August, it's important to call out that fiscal 2024 phasing of comparable earnings growth is not expected to align with prior years. Consistent with our comments from last quarter, we anticipate challenging market dynamics will persist in the near term, resulting in similar mid to high single digit volume declines through the December quarter. Combined with the unfavorable impact of higher interest expense, which is expected to moderate in the second half, our guidance for the first half is unchanged.

Correct.

Look I think it's going to it's going to be a function of inflation the rate at which pricing changes in this industry. I think from this point forward will be primarily a function of the rate and the direction of travel of inflation.

Not doing an industry over the years.

Positive price with the in the absence of value.

It's been an industry that is compensated for inflationary cost pressures and I think that's that's kind of where we're at right now.

Got it that's very helpful. Thank you.

Michael Casamento: Compared with last year, we expect that adjusted EPS for the six months of fiscal 2024 will be down in the high single digit to low double digit range on a comparable constant currency basis. For the second quarter, this implies adjusted EPS and EBIT in absolute terms will be broadly in line with or marginally lower than the September quarter just finished. As Ron mentioned earlier, our confidence in delivering mid single digit comparable constant currency earnings growth in the second half of fiscal 2024 and resuming our long-term trend of high single digit earnings growth shortly thereafter is supported by visibility this several known second half factors.

Your next question comes from the line of Cameron Mcdonald with E&P. Your line is open.

No.

Good morning, Michael.

Just ask a question on slide eight.

Hey.

You've got the average of high single digit of St from 14 to 23, but if we think about the environment. We had interest rates collapsed to zero during that period <unk> had significant transformational.

Acquisition with famous.

Hi.

The buybacks et cetera.

Michael Casamento: First, we have the benefit of approximately 35 million from structural cost saving initiatives that builds through the year. Second, we have increased earnings leverage resulting from ongoing benefits of price and cost actions taken. Third, as I noted earlier, a reduced interest headwind and fourth, we expect that customer inventory will have largely normalized as we progress through the second half and we will benefit from favorable prior year volume comparatives. Finally and also consistent with our comments in August, we do not need to see a significant change in the demand environment to return to solid earnings growth in the second half and beyond.

When you talk about the high single digits expected long term, how do we marry that up or do you still think that yes. There are significant M&A opportunities in the synergies that will create.

And then.

But as I come back to that interest rate environment, you've got a significantly higher interest rate, that's going to be impacting that Aps.

Yeah look it's a good question because it's really a segue into why we're confident that we're going to get back to kind of high single digit growth rates going forward and we just believe in the conviction of our formula that served us well over over many years and that is that volumes in a normal environment will grow sort of low.

Ron Delia: So with that, I'll turn the call back to Ron to provide some longer-term comments. Thanks, Michael.

Single digits.

Ron Delia: Before we open the call to questions, I want to provide a few words on the building blocks that inform how we think about growth over the longer term and then finish with a brief preview of our 2023 Sustainability Report which will be released in the coming days. Looking at slide 11, we've multiple drivers that have enabled us to deliver solid and sustainable earnings growth over the longer term, including opportunities in priority categories, emerging markets, and through innovation. These have not changed and collectively give us confidence in our ability to deliver future growth in line with our historic trend rates.

We will get leverage in terms of higher rates of profit growth in that because the mix will improve over time.

And as we generate more productivity in our operations so low single digit.

<unk> growth will translate into higher rates of profit growth and then the business generates a substantial amount of cash and really excess cash.

Excess to the needs of the business from a capex perspective and to fund the dividend and with that extra cash our first priority will be to do acquisitions as we've done over a long period of time and.

Ron Delia: Turning to slide 12 and some highlights from our forthcoming sustainability report, which covers the significant strides we've made in product development and operational sustainability. Sustainability provides meaningful opportunities to differentiate and drive growth and value. This is particularly important in today's landscape, as consumers focus on the critical need for more sustainable, high performance packaging solutions, and as customers increasingly look to work closely with responsible sustainability focused partners. Starting with our own operations, since launching Amcor's Environmental Action Program 15 years ago, we've diligently worked towards reducing our growth greenhouse gas emission intensity and have achieved a cumulative reduction of more than 40% against our 2006 baseline.

In short of acquisition opportunities, we'll buy back shares and so you go from low single digit volume growth too.

Something higher than that mid single digit type profit growth organically and then the cash flow and balance sheet optionality to generate further EPS growth through either acquisitions or share repurchases. So that's the formula that's the formula that has delivered the 8% over almost a decade.

And that's the Formula that we'll expect to deliver the same types of earnings growth rates going forward.

Thank you thanks, as a follow up to that just on the M&A.

When you think about the industry at the moment you've spoken about.

The industry doesn't really have real pricing power without that E.

Ron Delia: Along the way, we've also increased our ambition and committed to net zero emissions by 2050 in line with the Science-Based Targets initiative. In fiscal 2023, we delivered an annual reduction in absolute emissions of 10% through a range of measures, including an increasing focus on the use of renewable electricity. In addition to carbon-related objectives, we maintain robust targets for reducing water and waste. 100% of our sites have a water management plan in place, and 143 of our sites have achieved zero waste to disposal certification, which is an increase of around 20% in the last 12 months.

You've got a changing.

Expectation and sustainability.

Seeing we've obviously seen waste rock can Smith it get together.

Do you think the industry needs to more significantly in aggressively consolidate to change some of those industry dynamics.

Well look we've been big beneficiaries and big.

We've driven a lot of consolidation over the years I think what's.

What's important is is.

His industry structure and industry dynamics at a segment level.

The fact is that there are a lot of players that are very small in the industry. So when we think about our M&A agenda.

Ron Delia: Transitioning to slide 13, we also continue to make significant progress in supporting the development of circular systems and what we believe are the three requirements for responsible packaging, package design, waste management infrastructure, and consumer participation. Amcor's industry-leading innovation capabilities position us well to develop the more sustainable and high-performing packaging consumers are looking for, and we believe this is one of our greatest opportunities for growth and differentiation. Today, almost all of our rigid packaging and specialty carton portfolios are fully recyclable.

It's largely going to be bolt ons, we've been quite active even in the last 12 to 15 months or so we've done four small deals and you can continue to see you can expect that to continue to see us do that.

Look a lot a lot of the value that comes out of those deals is cost synergies.

I think.

That's where most of the value is going to come from in this particularly in this type of environment and we're going to be active participants.

In the M&A space.

Your next question comes from the line of Nathan Reilly of UBS. Your line is open.

Ron Delia: Looking at our flexible portfolio, 61% of fiscal 2023 sales were recycled ready, according to the Ellen MacArthur Foundation definition, meaning these solutions are designed to be recycled using current technologies where infrastructure is available. Additionally, another 28% of sales had recycled ready alternatives available, providing a meaningful growth opportunity when our customers are ready to transition more of their portfolios to sustainable solutions. In total, 89% of our flexible packaging portfolio is designed to be recycled or has a recycled ready alternative, a 6% percentage point increase over fiscal 22.

Thanks, Ron just a follow up in terms of free cash flow allocation point can you can you talk about where deleveraging sits in the context of the allocation of excess free cash flows.

Yes.

Obviously, we're committed to an investment grade balance sheet.

And so for us that kind of.

Had been in the range of two five to three times leverage.

For a long time, and that's where.

You should expect us to see.

Move forward so.

<unk> point as the earnings grow.

Ron Delia: Our use of recycled content also continues to grow, increasing by 29% over fiscal 22, reflecting our commitment to work closely with customers to reduce the use of virgin materials. Over the past four years, we've more than tripled our use of recycled material and where confident will achieve 30% recycled content across our portfolio by 2030. We also continued to leverage our position as an industry leader and trusted resource to help our customers navigate their sustainability journeys.

The cash flow grows and we can we can reinvest that.

In the base business. So you should expect capex over a period of time to increase as well so we've been increasing our level of capex to grow organically.

That's in that vein in that 3% to 4%.

It's now as we look longer term, that's probably going to be more in that 4% to 5% range.

That's going to drive the organic growth and we still have cashless leftover.

To invest in M&A agenda, as a priority and again grow earnings through that create value and then do buybacks and so as you.

Ron Delia: As an example in fiscal 23, we hosted several Amcor webinars which were attended by hundreds of customers and covered topics such as the use of recycled content in food contact and healthcare packaging and the impact of evolving regional regulations on packaging options. Through these efforts, we're reinforcing our value proposition and helping customers accelerate conversion of their packaging portfolios to comply with emerging regulations and to meet their own sustainability goals.

As you look at all that that we would continue to maintain that leverage in that two five to three times range. So.

How you should think about it the excess cash will be deployed in that way.

That's great. Thanks, Bob.

The line of John Purtell with Macquarie. Your line is open.

Yes.

Can I run and Michael Hi, just a couple of questions if I could.

Ron Delia: We take pride in the strides we've made across all aspects of our sustainability journey. We eagerly anticipate the opportunities ahead which will continue to differentiate Amcor and also advance our growth objectives, all while contributing to the creation of a circular economy for the packaging industry.

Firstly is.

On Gil Gil paid one obviously this is wayne.

Concerns across the sector and it's obviously.

Still.

Long term in terms of potential impacts on food consumption and packaging demand but.

Ron Delia: In summary on slide 14, fiscal 24 has started in line with our expectations. We have reaffirmed our earnings and cash flow guidance today as we continue to have confidence and visibility to solid earnings growth in the second half. We're making good progress on our sustainability agenda and we remain focused on our strategy to deliver long term growth and value creation.

So still very early days, but.

Do you have any general observations Mike.

Yes, I do John I think firstly I would just yeah I just want to reinforce that we are seeing no impact whatsoever on demand.

In our in our segments.

From from from reduced consumption, resulting from these drugs. So the first point I want to make is that we've seen no impact.

Operator: So operator, we are now ready to open the call for questions. So if you have a question, please press star one on your telephone keypad to withdraw your questions, simply press star one again. In the interest of time, we would like to remind participants to limit their questions to one and then to rejoin the queue for any follow up.

As of yet I think in terms of trying to estimate the future impact.

I think theres some things that we.

There's plenty of things, we don't know and Theres. Some things that we do know based on history. I think we don't know is the rate.

Ghansham Panjabi: Your first question comes from the line of Genshin Punjabi with Baird, your line is open. Thanks, operator, good day everybody. Ron, could you give us a bit of a sense as to what your base cases for volumes for fiscal year 24 and I'm just trying to get a sense as to the sequencing beyond the first quarter, which is down 8%.

Of.

Adoption of these drugs, we don't know.

What the impact on total consumption will be.

What will happen when people go off the drugs. It in large numbers. So there's a number of unknowns that I think only time will tell.

Ron Delia: Would it be sort of 4Q before you hit that inflection point on a year of your basis? Thanks for the question, Genshin, look firstly, as we entered the year, we flagged that we expected volumes to be down mid-dye single digits for the first half and that's exactly what we saw in the first quarter and we expect similar trajectory for the second quarter as well as we look forward to the second half, we do expect a trajectory to improve.

What we do know is the food and beverage industry over many many years over decades has been.

Fantastic at innovating to address consumer needs as they change and evolve over time think about the evolution towards lower fat low sugar less salt org.

Organic.

The food and beverage industry has navigated those trends really successfully.

Ron Delia: So we would expect that the destocking will abate as we get past year end and as we start to cycle several quarters of inventory reductions, we would expect that impact to start to moderate. And we would expect for the second half volumes more reasonably flatish flat up to plus or minus low single digits. I think it's more reasonable to expect that the trajectory will improve now exactly the rate at which that trajectory improves in the second half is difficult to predict.

Through innovation and through adapting.

Product portfolios to suit wherever consumers are prioritizing at that point in time. So we know that thats been the history and Thats been the track record and I expect that that would be yes.

At the same going forward and the other thing that we know is to the extent there is reduction in portion sizes or are serving sizes. It tends to and has.

<unk> been very good for packaging intensity and units of packaging have tended to go up as portions have gone down.

As.

Ron Delia: But certainly as we get into the fourth quarter, the comps get a lot easier and we would expect things to be improving as we exit the year. Okay, thanks for that Ron.

As serving sizes have been reduced so.

I think it's early days as you said.

I would lean more on the things that we know.

To have been true historically, and probably put more emphasis or more weight on those factors then the things that we don't know at this stage.

Ron Delia: I'm just trying to understand the divergence also between volumes which are quite a bit lower against improved price mix as you've established over the last couple of quarters and sustainability of that dynamic. And typically during periods of weaker volumes, there tends to be some sort of a trade down and actually showcasing the opposite. More call on that please. Well, look, mix over a longer period of time over multiple years is a major source of earnings leverage for us and has been over a long period of time.

Got it thank you and just a second question.

Michael if I could pile.

Page 11 of the news release, obviously shelves that reconciliation between reported and adjusted earnings.

We can see that hyperinflation impacts were higher than last year.

Russia, Ukraine costs were higher as well so what were the key drivers of that and should we expect to see those Russia, Ukraine costs reduce going forward. Thank you.

Ron Delia: As we emphasize higher value segments, both product segments and market categories, mix is a very important part of our playbook. For this year, on a full year basis, we expect mix to be more or less neutral. We've had a reasonably good start in the first quarter with positive mix in both segments. We would expect that probably will will continue in the second quarter, but for the full year, we would expect that might normalize a little bit.

Yes, sure John I can take that one look the Russia, Ukraine costs are really the.

That's the cost of the restructuring so.

And we've moved into the program and Ron touched on the program earlier, the structural program, where we are.

Committed to spend about $170 million in cash from the rash of proceeds.

Across.

Some plant closures so there'll be.

7% to 10 plant closures, some essence SG&A right sizing.

Ron Delia: The reason for that is some of the segments that are higher value have declined at a lower rate than some of the lower value categories. But as we look forward into the second half, we think that the healthcare destocking will continue and ultimately that will balance out the positive first quarter. So all up relatively neutral for fiscal 24, but on a multi year basis, mix is absolutely part of the earnings algorithm going forward.

And.

The restructuring costs, there and they're going to continue through the year.

Youll see those continue on.

And obviously from that restructuring, we're going to generate the $50 million in EBIT benefits.

35 million of which will come.

In <unk>, two and then a further $15 million into FY 'twenty five.

You should expect to see.

A continuation of some cost.

Daniel Kang: Your next question comes from the line of Daniel Kang with CLSA. Your line is open. Good morning, everyone.

Cost in that line in relation to Argentina.

It was Argentina hyperinflation economy.

And we have to account for agitator sit in why isn't really a that's just there was a devaluation in August.

Ron Delia: I guess the first question from me is on the destocking cycle. Please persist in the quarter. Are you seeing any evidence or signs of destocking easing as we walk into the second quarter? Perhaps you can comment on what you're seeing on customer stock levels as well. Yeah, look, I think we're using the term destocking. I think what we're seeing is more broadly is just inventory reductions destocking might imply that inventories started at a higher level.

And thats the devaluation impact on the monetary assets, which was.

Higher than it was in the prior year, but again.

That seems to have eased at the moment, but we will see where that goes as we work through the year.

Your next question comes from the line of Brook Campbell Crawford with Darin Jelly. Your line is open.

Good afternoon, Thanks for taking my questions and Ron just to have you. All you mentioned that Destocking in house cash segment is likely to continue in the second half correct me if I'm wrong I think you mentioned asked just.

Ron Delia: And I think that's certainly true in some categories that were subject to more of the supply chain constraints and raw material shortages over the last 12 to 18 months. There certainly were some inventory, some inventory accumulation, but I think we've got a few different dynamics that are driving the inventory reduction trend. The first is for those categories that started at a high level, obviously, they're working down the excess at a time when consumer demand has softened.

Can you provide some color there on why you think thats kind of Plaid, while you might have more visibility talk destocking in that part of the market pressures are there other categories that you serve.

Yes, good question.

You've got that right I did refer to destocking accelerating really through the first quarter in healthcare.

Especially in the medical device side of that business.

Ron Delia: And also carrying cost of inventory is now much higher than it's been in a long period of time. So I think that we're seeing a number of companies, including Ampore, try to drive inventories down to lower levels than they've been in quite some time. I know that we are certainly on that on that path. So I don't expect that trend to be beyond to be passed us in the second quarter, particularly as we're heading towards a year end.

And it really comes down to the fact that there were some real.

Ron Delia: And cash flow a year end becomes an important metric that companies are driving towards. So we would expect that the destocking will abate in the second half, but not in the second quarter. Got it, thanks Ron.

Supply constraints over the last 12 months to 18 months in that segment or in the in.

In the products that we supply into <unk>.

Medical predominantly but also pharma and some in some product categories.

Where we and the rest of the industry lived through.

Some real raw material shortages, which I think.

Led to some stock buildup.

In some segments and so we're now on the other end of that raw materials are now more available there is no longer a shortage.

Ron Delia: Secondly, I'm just interested in the progress of the new packaging products, Amlight, Amphibode, etc. Realize this early days, but can you comment on the volume growth and customer adoption that you're seeing and the pricing premium that you're achieving? Yeah, look, we're really excited about some of those platform products that you mentioned, Amlight, which is a retortable, a recycle ready retortable structure, Amphibode, which is a paper based solution, Amsky, which eliminates PVC and PVDC from blister packaging.

And we can supply in real time, and so customers are sitting on a reasonable amount of inventory that needs to be worked down and I think we started to see that in the first quarter I think we'll see that continue into the second half of this fiscal year.

Okay. Thanks, and just one quick follow up on Slide 13 May just talk to some progress you're making on that.

Design, a vaccine to be recycled.

Great progress there over the years Bush and in flexible packaging is still.

That 1% of the portfolio that is designed to be recycled and it is now trials.

Ron Delia: We think that we've got some really special products there with a really compelling value proposition for customers that are trying to drive their own sustainability agenda. It is early days. Several of those products though are generating real sales. So AMPREMO, which is also a recycled ready alternative, AMP Sky, AMP Fiber, they're all each generating sales in the tens of millions of dollars, low tens of millions of dollars, but real meaningful sales.

Okay.

On the way at the moment, but I looked at that graph. So can you just talk to that part of the portfolio Whats the plan and do you have a commitment still solid solid 3% of that portfolio design can be recycled by 2025 sites.

Yes look we're going to continue to shrink that part of the graph. So the 11% youre, referring to is is 6% lower than it was a year ago.

We've been making really good progress it's substantially improved over even three years four years ago, and we're going to continue to close that gap look are we going to get all the way to 100% I'm not sure I think we're going to get really close.

Ron Delia: AMP Sky, it's early days, and it's primarily oriented to the pharma industry, so the qualification period is a bit longer. But we are in active trials with a whole range of customers on that one as well. So we're we continue to be really excited about those platforms that you've asked about.

Some of the more sophisticated structures, where that material is providing multiple types of functionality, whether it's whether it's barrier or.

Adam Samuelson: Your next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open. Yes, thank you. Good afternoon. I was hoping maybe first talk about just the performance in the quarter from the difference between volume and comparable constant currency operating profit growth, and this very little volumes you leverage in the period and to contrast the fiscal 23 experience. Maybe Ron's a little bit more color on kind of how you're able to narrow the gap with volumes down.

Sealant strength or through our physical strength as a number of different.

Components that go into some of the more sophisticated materials that we make those will take the longest but we're still at it we're hard at it and we haven't we.

We haven't wavered in our.

Ambition to get to 100% and so we've got.

Got our sights on closing that gap.

Your next question comes from the line of George Staphos.

With Bank of America. Your line is open.

Thanks for taking the follow on I'll make it quick guys. So Ron if we think about the $200 million last year.

Adam Samuelson: I think it's kind of keeping the profit declines that narrow. Yeah, look, it's it's just been really aggressive pulling the cost lever, it really aggressively, and we continue to do that through the back end of fiscal 23 and into the start here in the first quarter of fiscal 24. So, you know, you might recall in August, we talked about the cost actions that we took in fiscal 23, where we we reduced cost by over 200 million dollars.

Adam Samuelson: We reduced head count by over 1200 people. We pulled the procurement lever really hard. We cut overheads. All of that continued in the first quarter and actually accelerated. So, in the first quarter, coming off a year where we took 200 million dollars of cost out in the first quarter, we took another 70 million dollars of cost out versus the first quarter of the previous year. And so that's really resulted in improved earnings leverage and much say a much more dynamic ability to flex costs in the face of weaker volumes. Okay, I appreciate the call. I'll keep it to one question. Thanks. Thanks, Adam.

Temporary savings if thats the way you framed it in the $70 million so far this year.

I've been a day, how much of that truly will be temporary and how much do you think will be structural I know, it's hard to say, we won't hold you to the basis point, but what if you were in our seat trying to model Amcor would you try to bake in and then just a minor question I thought I heard you say.

Or Michael maybe the shoe that <unk> in terms of earnings and EBITDA EBITDA might be flat to slightly down versus <unk> I just wanted to make sure I heard that correctly, thanks, guys and good luck in the quarter.

And so I can tell you the second point the George Yes, you heard that correctly I mean Q2.

Q1, and Q2 typically are pretty similar.

If you look over the history of ample pretty similar.

We're not expecting anything to be.

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Different in this in this dynamic I mean Q2 is going to be broadly in line with Q1, perhaps marginally.

Marginally less but each one as per our expectations that we've outlined so so no change there whatsoever.

George Staphos: Your next question comes from the line of George Stafos. What is Bank of America? Your line is open.

George Staphos: Hi, everyone. Good morning, good afternoon. Thanks for taking my questions. I just want to make sure it's two questions per one question for and I want to over do the quota here. George, for you, it's two. Okay. I'll try to keep them good then. So, I guess the first thing I wanted to ask is in an environment where we're still to somebody waiting for customers, your customers to begin promoting more aggressively to try volume.

Yeah look on the cost side, George I'm, not going to parse it down and give you a number what I would say is most of the costs come out has come out of the operational side.

The overhead portion of the cost reduction is certainly going to stay out.

On the plant side.

To the extent, we've driven procurement benefits those will be sustained.

And then to the extent that we've taken costs out by removing shifts and obviously, we'll put those shifts back on as volumes return.

I would just describe it more in terms of the buckets of costs that have come out of it we don't think about that whole.

George Staphos: If you agree with that premise, are you starting to see that? And how does that reconcile with your wanting this to push more innovative new products, new products, sustainability, which are typical going to have a higher price point? Who's, you know, who's winning that tug of war right now, as you think about it? And are we seeing more promotional activity? Look, it's anecdotal at best, George. I mean, there's, I think a general recognition across the customer base that, you know, the price lever has been pulled really hard and you see that from the results of a range of consumer companies that price has been, you know, real driver of revenue growth more so than volumes and maybe that maybe those two variables can be brought back into better balance over time and you do hear anecdotally.

Quantum of cost as being temporary necessarily we do think theres some that stays out of the business even as volumes return.

Thanks, Ron I appreciate it good luck in the quarter.

Thanks George.

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

Okay. Thanks, again to everyone, who has joined the call today. Thank you for your questions and thanks for your interest in Amcor and operator with that we'll close the call.

Thank you. This concludes today's conference call. Thank you for joining you may now disconnect your lines.

[music].

George Staphos: More customers talking about reprioritizing volume or balancing their mix a little bit more towards volume. We need to see it and we haven't seen it yet. And so, you know, we're not setting the business up on the expectation that that happens. In fact, our second half earnings uplift that we're expecting is not at all lever to an improved demand environment. And it's not at all predicated or dependent on consumers taking a more active approach to promote.

Yes.

Yes.

Okay.

Okay.

Sure.

Ron Delia: Thanks, Ron. And the second question, you know, broadly, can you talk a little bit about the momentum you apparently are seeing in protein packaging? You have a new high barrier win that you highlight on one of the slides, you have your recycle ready, eco tight package, you know, is there a way to put a quantum size, what kind of momentum you're seeing, you know, what kind of incremental revenue you're getting? And broadly, you know, why you are gaining this momentum in the market, given that you're the smaller player in the market.

Okay.

Ron Delia: Thanks, and I'll be back if there's time later on. Okay, look, I think it's the early innings of our journey on protein, in particular, our journey as a full service solutions provider in meat and protein packaging, which includes the ability to offer equipment now as a result of the acquisition that we made earlier this year in Moda. It's early innings. I think that we are picking up some modest pieces of business along the way, but I would also point out that meat sales have been weak, we're in a down part, a down cycle or a trough, let's say, a low point of the cycle in beef in particular.

Ron Delia: And so meat sales have actually been weak across the company in the first quarter. It's a long, it's a long game and we're in the early innings. And so I would say that, you know, we're really confident in the value proposition that we have and that we're building. We think we've got some really special films and we think we've got a really special comprehensive offering that includes now equipment and service. But it's very, very new, a very recent, the Moda acquisition is only a few months, a few months old.

Sam Salwood: Your next question comes from the line of Sam Salwood City. Your line is open. Good morning, evening all. Thanks for taking my question. Just a simple one on the balance sheet. Just wondering if we don't get that second half volume stabilization, but that result in that outside range, or would there be enough in the seasonality and the unwinding of work and capital to bring that out. That's very expected. I'll be focused in continuing to decline.

Sam Salwood: Yeah, thanks for the question, Sam. I can take that one. Yeah, look, I mean, we finished the quarter with net debt at six point five, six point six billion and leverage a three, three point three times, which was right in line with where we expected it to be. And that takes into account the relatively normal seasonality of the cash flows from fourth quarter to Q1. We typically see a tick up in leverage versus we were at three times in June.

Sam Salwood: The other fact is impacting leverage are really on the two temporary impacts. Firstly, we're lapping now three quarters of the vested Russia earnings. And that's being reflected in the last 12 months, the BDA. And that's ahead of us getting the benefit of the restructuring, which is going to start to come through age two. So you'll start to see that improve absolutely. And then the other one is really the higher the normal working capital levels, you know, we've been driving inventory down, but at the same time payables have come down at a faster rate, really just on the back of the lower demand environment.

Sam Salwood: So again, you know, we'd expect that to start to normalize as we get into the second half and, you know, we'll get, we'll get the leverage back to three times by the end of June. So that's kind of the way we see it. And as we look forward from there, you know, there'll be further opportunity for improvement, particularly in the working capital as it continues to normalize. And as we cycle through the full 12 months of the Russia and the benefits from the restructuring that we're going to get in, for the panel. So, you know, we're on track there. Got it.

Ron Delia: And just maybe a follow-up, you talked at length about evolving expectations of the year, maybe thoughts on pricing, kind of extra pass-throughs, given end mark, weakness, and ongoing destoffing. Well, look, our pricing strategy has been, first and foremost, to compensate for inflation. And, you know, that's our approach. It's as simple as that. We've had inflationary pressure on the cost base for 12 to 18 months now, and as a result, we've taken price as a high priority from an industry leadership perspective, and certainly prioritized price and inflation recovery over volume.

Ron Delia: Rates of inflation are starting to ease. We haven't seen large parts of the cost base go through experience decreases yet, but the rate of inflation has eased, and so our pricing, the pace of our pricing will ease as a result. And, you know, beyond that, you know, our pricing approach is really just a price for value. If we have a differentiated value proposition, you know, there's an opportunity to generate a positive price. But, you know, that's something that needs to be earned every day in the marketplace.

Michael Roxland: Your next question comes from the line of Mike Rockflin with tourist securities. Your line is open. Thank you, Ron, Michael Tracy, and David for taking my questions.

Ron Delia: I actually question just one question, really. You know, the company made solid progress, streamlined the portfolio, not 70 million dollars, not saving this quarter, closing plans, real line production, headcount reduction. If when volumes begin to improve, should we expect to see a reversal of this and you putting more capital to work in new plans, increasing headcount, what really does your existing footprint as it stands today have enough access capacity to absorb incremental volumes without any additional investment?

Ron Delia: Yeah, that's a great question. You know, I think the short answer is we're going to be well set up when volumes come back, and I think we're going to get even stronger earnings leverage as volumes return. And we're taking really two sets of actions on the cost side. So the first, the 70 million dollars that I referred to earlier that you just referenced is really ongoing productivity oriented benefits where we're taking shifts out, reducing headcount, driving procurement, optimizing the overhead and SGNA part of the business, kind of steady state, but aggressive belt tightening, I would say.

Ron Delia: That's one form of cost reduction. And I don't think a lot of that. Now, some of it will come back obviously as volumes come back, you need to add shifts, but we will be in a much better position from a leverage perspective as volumes return. So that's on that side. The second stream of cost takeout relates to more structural initiatives which are more than restructuring, more of the restructuring type, which are plant closures and more permanent and more deep-cutting overhead reductions.

Ron Delia: We really haven't seen the benefits yet from those initiatives. Those will start to build in the second half as Michael referred to earlier. We expect to get about 35 million dollars of benefits from more structural initiatives in the second half. And those also will be long lasting and sustainable because we're going to be taking out several plants in the network that we can compensate for with the remaining footprint. And in many cases, when we close a facility, we relocate the productive assets into another facility and we don't really take capacity out necessarily. So I think we're going to be well positioned when and if volumes return.

Ron Delia: Thanks for having me. Thanks.

Richard Johnson: Your next question comes from the line of Richard Johnson with Jeffries. Your line is open. Thanks very much. Ron, can I just return to the subject of price and in particular the US protein market. I'm interested in the comments you make. I'm just trying to reconcile that with what others in the market are saying and they're referring to significant over capacity in that market, which makes sense given how weak the end market is, which is leading to acute price pressure because of that unused capacity. It's just the interesting to get your thoughts on that.

Ron Delia: I don't know that the pricing pressure or the intensity of the competition is any more so at the moment in that segment than it has been in the past or that it will be in the future. You have to remember as well that the assets that are deployed against that segment are fungible across a range of categories. So we have film assets that produce into the protein market, also produce specifications for dairy and a number of other segments as well.

Ron Delia: So it's certainly not a market that we look at as being overly capitalized or having much excess capacity. And then you sort of spread that through the US around the different categories. I mean, can I can extrapolate from your comments around how that you think positive price makes trend. That's really across all the categories or are there any areas where prices starting to or you're starting to give back price, which inevitably you would expect given given how far price has gone at some point that will normalize correct.

Ron Delia: Look, I think it's going to be a function of inflation. The rate at which pricing changes in this industry, I think from this point forward will be primarily a function of the rate and the direction of travel of inflation. You know, it's not doing an industry over the years that had positive price with the in the absence of value. It's been an industry that is compensated for inflationary cost pressures, and I think that's that's kind of where we're at right now. That's very helpful.

Ron Delia: Thank you.

Cameron Mcdonald: Your next question comes from the line of Cameron McDonald with E&P. Your line is open. Good morning, Ron Michael. Can I just ask a question on slide 10. So you've got the average of high single digit of 8% from 14 to 23, but if we think about the environment, you know, we had interest rates collapsed for zero during that period. You've had a significant transformational acquisition with Bemis. You've had the buybacks, etc.

Cameron Mcdonald: When you then talk about the high single digits expected long term, how do we marry that up? What do you still think that there are significant M&A opportunities and the synergies that that will create? I suppose I come back to that interest rate environment. You've got a significantly higher interest rate that's going to be impacting that APS.

Ron Delia: Yeah, look, it's a good question because it's really a segue into why we're confident that we're going to get back to kind of high single digit growth rates going forward. And we just believe in the conviction of our formula that's that served us well over over many years. And that is that volumes in a normal environment will grow sort of low single digits. We will get leverage in terms of higher rates of profit growth than that because the mix will improve over time.

Ron Delia: And as we generate more productivity in our operations, so low single digit volume growth will translate into higher rates of profit growth. And then the business generates a substantial amount of cash and really excess cash excess to the needs of the business from a cap ex perspective and to fund the dividend. And with that extra cash, our first priority will be to two acquisitions as we've done over a long period of time, and short of acquisition opportunities we'll buy back shares.

Ron Delia: And so you go from low single digit volume growth to something higher than that mid single digit type profit growth organically and then the cash flow and balance sheet optionality to generate further EPS growth through either acquisitions or share repurchases. So that's that's the formula. That's the formula that's delivered the 8% over almost a decade. And that's the formula that we'll expect to deliver. Over the same types of earnings growth rates going forward.

Ron Delia: Thanks.

Ron Delia: As a follow up to that, just on the M&A, can you know, when you think about the industry at the moment you've spoken about, you know, the industry doesn't really have real price power without value. You know, you've got a changing, you know, expectation around sustainability. We're seeing, you know, we've obviously seen West Rock and Smith get together. You know, do you think the industry needs to more significantly and aggressively consolidate to change some of those industry dynamics? Well, look, we have been big beneficiaries and big cat. We've driven a lot of consolidation over the years.

Ron Delia: I think that what's important is. Industry structure and industry dynamics at a segment level. The fact is that there are a lot of players that are very small in the industry. So when we think about our M&A agenda, you know, it's largely going to be both on. We've been quite active, even in the last 12, 15 months or so, we've done four small deals. And you can continue to see, you can expect to continue to see us do that.

Ron Delia: Look, a lot of the value that comes out of those deals is cost energies. You know, I think that's where most of the value is going to come from in this, particularly in this type of environment. And we're going to be active participants in the M&A space.

Nathan Reilly: Your next question comes from the line of Nathan Riley of UBS. Your line is open. Thanks, Ron. Just a follow up in terms of free cash flow allocation point. Can you talk about where the leveraging sits in the context of the allocation of excess free cash flows? Yeah, I mean, you know, obviously we're committed to an investment grade balance sheet. And so for us, that kind of, you know, we've had been in the range of two and a half to three times leverage, you know, for a long time.

Nathan Reilly: And that's, that's where, you know, you should expect us to sit. You know, as we move forward, so, you know, to Ron's point as the earnings grow, you know, the cash flow grows and we can, we can reinvest that in the base business, so you should expect capex over a period of time to increase as well. So we've been increasing our level of capex to grow organically. You know, that's in that's been in that three to four percent range.

Nathan Reilly: It's now, you know, as we look longer term, that's probably going to be more in that four to five percent range. You know, that's going to drive the organic growth and we still have cash left left over, you know, to invest in the M and A agenda as a priority and again grow earnings through that grade value and then do buybacks. And so, you know, as you look at all that, that we would continue to maintain that leverage in that two and a half to three times range. So, you know, that's how you should think about it. The excess cash will be deployed in that way.

Michael Casamento: That's great, thanks Michael.

John Purtell: Fine of John Purtell with McQuarrie, your line is open. I'll get a Ron and Michael, I hope you will.

Ron Delia: Just a couple of questions if I could. The first is on BLP1, obviously there's been concerns across the sector and it's obviously all still sort of long term in terms of potential impacts on food consumption and packaging demand. So still very early days, but do you have any general observations to make? Yeah, I do, John. I think firstly, I would just want to reinforce that we have seen no impact whatsoever on demand in our segments from reduced consumption resulting from these drugs.

Ron Delia: So the first point I want to make is that we've seen no impact as of yet. I think in terms of trying to estimate the future impact, you know, I think there's some things that we, there's plenty of things we don't know and there's some things that we do know based on history. You know, I think what we don't know is the rate of adoption of these drugs. We don't know what the impact on total consumption will be.

Ron Delia: We don't know what will happen when people go off the drugs in large numbers. So there's a number of unknowns that I think, you know, not only time will tell. What we do know is the food and beverage industry over many, many years over decades has been fantastic at innovating to address consumer needs as they change and evolved over time. Think about the evolution towards lower fat, low sugar less salt, organic, the food and beverage industry has navigated those trends really successfully through innovation and through adapting product portfolios to suit whatever consumers are prioritizing at that point in time.

Ron Delia: So we know that that's been the history and that's been the track record. And I expect that that would be the same going forward. And the other thing that we know is the extent there's reduction in portion sizes or serving sizes tends to and has historically been very good for packaging intensity and units of packaging have tended to go up as portions have gone down. And as serving sizes have been reduced.

Ron Delia: So, you know, I think it's early days, as you said, I would, I would lean more on the things that we know to have been true historically and probably put more emphasis or more weight on those factors than the things that we don't know at the stage.

Michael Casamento: Thank you.

Michael Casamento: And the second question for Michael, if I could page 11 of the news release, I should show that reconciliation between reported and adjusted earnings. We can see that the high print fashion impacts were higher than last year and Russia Ukraine cost for higher as well. So what were the key drivers of that and should we expect to see those Russia Ukraine costs reduce going forward?

Michael Casamento: Thank you. Yeah, sure, I can take that one. The Russia Ukraine cost, really, that's the cost of the restructuring. So, you know, we've moved into the program and run touched on the program earlier, the structural program where we've committed to spend about 170 million in cash from the Russia proceeds across some plant closures.

Michael Casamento: So, I'm just going to start there'll be... 17 to 10 point closures, some SGNA right sizing, and they're the restructuring costs there and they're going to continue through the year. You'll see those continue on. And obviously from that restructuring, we're going to generate the 50 million in EBIT benefits, 35 million of which will come in age two and then a further 15 million into FY 25. So, you know, you should expect to see, you know, a continuation of some cost in that line.

Michael Casamento: In relation to Argentina, you know, there was Argentina as a hyperinflation economy and you know, we have to account for Argentina certain ways and really that's just there was a devaluation in August and that's the devaluation impact on the monetary assets, which was higher than it was in the prior year. But again, you know, that seems to have eased at the moment, but we'll see where that goes as we work through the year.

Brook Campbell: Your next question comes from the line of Brook Campbell Crawford with Baron Joey. Your line is open. Good afternoon, thanks for taking my question. Ron, just earlier on you mentioned that the destocking in healthcare segments likes to continue in the second half. Correct me if I'm wrong, I think you mentioned that. Just why some color there on why you think that's going to play out and why you might have more visibility on destocking in that part of the market versus other categories that you serve.

Brook Campbell: Thanks. Yeah, it's a good question. You've got that right. I did refer to destocking, accelerating really through the first quarter in healthcare, especially in the medical device side of that business. And it really comes down to the fact that there were some real supply constraints over the last 12 to 18 months in that segment or in the in the products that we supply into medical predominantly, but also pharma and some product categories where we in the rest of the industry lived through some real raw material shortages, which I think led to some stock buildup in some segments.

Brook Campbell: And so we're now on the other end of that and the raw materials are now more available. There's no longer a shortage and we can supply in real time. And so customers are sitting on a reasonable amount of inventory that needs to be worked down. And I think we started to see that in the first quarter. I think okay, thanks.

Ron Delia: I'm just one quick follow up on slide 13 Mary. You just talked to some progress you're making on designing the packaging to be recycled and great progress there over the years, but in sexual packaging, there's still 11% of it portfolio that isn't designed to be recycled and there's no trials on the way at the moment by the looks of that graph. So can you just talk to that part of the portfolio?

Ron Delia: What's the plan? And do you have a commitment still to have it 100% of that portfolio designed to be recycled for 2025? Yeah, look, we're going to continue to shrink that part of the graph. So the 11% you're referring to is 6% lower than it was a year ago. And we've been making really good progress. It's substantially improved over even three to four years ago. And we're going to continue to close that gap.

Ron Delia: Look, are we going to get all the way to 100%? I'm not sure. I think we're going to get really close. Some of the more sophisticated structures where the material is providing multiple types of functionality, whether it's, whether it's barrier or Sealant Strand, or physical strength is a number of different components that go into some of the more sophisticated materials that we make. Those will take the longest, but we're still at it, we're hard at it, and we haven't wavered in our ambition to get to 100%. And so we've got our sights on closing that gap.

George Staphos: Your next question comes from the line of George Staphos with Bank of America. Your line is open. Thanks for taking the follow on. I'll make it quick guys. So, Ron, if we think about the $200 million last year of temporary savings, if that's what you framed it in the 70 million so far this year, I've been a day. How much of that truly will be temporary and how much you think will be structural?

George Staphos: I know it's hard to say we won't hold it to the basis point, but, you know, if you're an RC trying to model Amcor, what would you try to bake in? And then just a minor question, I thought I heard you say, or Michael, maybe this you that QQ in terms of earnings and EBITM might be flat to slightly down versus one. I just wanted to make sure I heard that correctly.

Ron Delia: Thanks guys and good luck in the quarter. So I can take the second point there, George. Yeah, you heard that correctly. I mean Q2, Q1 and Q2 typically are pretty similar. You know, if you look over the history of Amcor, pretty similar. We're not expecting anything, you know, to be different in this in this dynamic. I mean Q2 is going to be brought in line with Q1 perhaps marginally less. But H1 as per our expectations that we've outlined.

Ron Delia: So no, no change there whatsoever. Yeah, look on the cost side, George, I'm not going to parse it down and give you a number of what I would say is, you know, most of the cost that's come out is come out of the operational side with the overhead portion of the cost reduction is certainly going to stay out on the plant side to the extent we've driven procurement benefits. Those will be sustained.

Ron Delia: And then to the extent that we've taken cost out by removing shifts, then obviously we'll put those shifts back on as volumes return. So I would just describe it more in terms of the buckets of cost that have come out at. We don't think about that whole quantum of cost is as being temporary necessarily. We do think there's some that stays out of the business, even as volumes return.

Ron Delia: Thanks, Ron. Appreciate it.

Ron Delia: Good luck in the quarter.

Operator: Ladies and gentlemen, this concludes our question and answer session.

Ron Delia: I will now turn the call back to Ron for closing remarks. Okay, thanks again to everyone who's joined the call today. Thank you for your questions and thanks for your interest in Amcourt and operator with that will close the call. Thank you.

Operator: This concludes today's conference call. Thank you for joining.

Operator: You may now disconnect your line. Thank you.