Amcor plc

Full Year Results 2022

5.30pm EDT August 17, 2022 / 7.30am AEST August 18, 2022

Amcor plc - Full Year 2022 Results Conference Call, August 17, 2022

C O R P O R A T E P A R T I C I P A N T S

Tracey Whitehead, Global Head of Investor Relations

Ron Delia, Chief Executive Officer

Michael Casamento, Chief Financial Officer

C O N F E R E N C E C A L L P A R T I C I P A N T S

Anthony Pettinari, Citigroup

Ghansham Panjabi, Robert W. Baird

Brook Campbell-Crawford,Barrenjoey

Larry Gandler, Credit Suisse AG

George Staphos, Bank of America

Adam Samuelson, Goldman Sachs

Jakob Cakarnis, Jarden Australia

John Purtell, Macquarie

Richard Johnson, Jefferies LLC

Kyle White, Deutsche Bank

Daniel Kang, CLSA

Mark Wilde, Bank of Montreal

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ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

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Amcor plc - Full Year 2022 Results Conference Call, August 17, 2022

P R E S E N T A T I O N

Operator Instructions

Tracey Whitehead

Thank you, Operator, and thank you everyone, for joining Amcor's June Quarter Earnings Call for Fiscal 2022.

Joining the call today is Ron Delia, Chief Executive Officer, and Michael Casamento, Chief Financial Officer.

Before I hand over, let me note a few items.

On our website, amcor.com, under the Investors section, you'll find today's press release and presentation, which we will discuss on the call. Please be aware that we will also discuss non-GAAP financial measures, and related reconciliations can be found in that press release and the presentation.

Remarks will also include forward-looking statements that are based on Management's current views and assumptions. The second slide in today's presentation lists several factors that could cause future results to be different than current estimates, and reference can be made to Amcor's SEC filings, including our statements on Form 10-K and 10-Q, for further details.

During the question-and-answer session, as the Operator mentioned, we request that participants ask their question and then rejoin the queue for any additional questions.

With that, over to you Ron.

Ron Delia

Thanks Tracey, and thanks everyone for joining Michael and myself today to discuss Amcor's financial results for Fiscal 2022.

We will begin with some prepared remarks, before opening for Q&A.

We are kicking off with Slide 3, which covers safety, our first and most important value. Throughout Fiscal 2022, we continued to make good progress on our long-term objective of eliminating injuries across our global operations. The focus of our teams on implementing additional safety best practices resulted in a further 3% reduction in the number of reported injuries globally, and I'm pleased to report that well over 50% of our sites continue to be injury-free for the past 12 months, or more. We pride ourselves on making the wellbeing of our 44,000 global employees our number one objective and we will continue to strive to achieve our goal of no injuries.

Turning to our key messages for today, on Slide 4.

First, FY2022 has been another outstanding year for Amcor. We could not be more pleased with our teams, who have demonstrated remarkable perseverance and agility, continually adjusting to challenges in the operating environment, from raw material shortages to high inflation, while remaining focused on driving value for our customers and our shareholders. As a result, financial performance was strong, with

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Amcor plc - Full Year 2022 Results Conference Call, August 17, 2022

growth across all key metrics. The business finished the year with good momentum, more than offsetting any external headwinds, so that Q4 was our strongest quarter of sales and EBIT growth, and full year EPS growth of 11% was at the top end of our guidance range.

Second, we expect the business to continue performing well and we anticipate sustaining strong underlying growth in FY2023.

Finally, we have a resilient and compelling investment case which has consistently delivered significant shareholder value through a combination of organic growth, value-creating acquisitions and cash returns to shareholders.

Turning to some financial highlights for the year, as outlined on Slide 5, in short, we have added to our track record with another year of sustainable growth in the underlying business.

Focusing on the strong June quarter, net sales growth was 13%, and this included approximately $1.7 billion of incremental price increases, on an annualized basis, related to the pass through of higher raw material costs. Excluding this pass through, organic sales growth accelerated through the year, reaching 6% for the June quarter in both the Flexibles and Rigid Packaging segments. Our strong performance reflects good work by our teams to recover broader and higher levels of general inflation, mostly through the second half of the year. It also reflects favorable volume and mix benefits, and as we have in the past several quarters, we benefited from mid- to high-single-digit growth in high-value priority segments, which confirms that our focus on these faster growing markets is paying off.

This top line growth converted into Adjusted EBIT growth of 9% in the June quarter. It's worth noting that this high-single-digit earnings growth was achieved in a quarter which clearly no longer benefited from any synergies and while we continued to experience significant inflation and an unfavorable price/cost lag related to raw materials.

Flexibles delivered outstanding EBIT growth of 11% in the quarter and was in line with our expectations. Earnings growth continued to improve in Rigid Packaging.

For the full year, net sales growth was 13%, and 4% on an organic basis, which represents our third consecutive year of accelerating top line growth. Adjusted EBIT of $1.7 billion was 7% higher than the prior year and Adjusted EPS of $0.805 per share was 11% higher than one year ago.

Our financial profile remains strong, with return on average funds employed at 16.3%, and we also returned more than $1.3 billion of cash to shareholders through share repurchases and a higher annual dividend.

Now, before handing over to Michael for more detail on the financial results, let me provide an update on our business in Russia.

As previously announced, we've been exploring all strategic options for our Russian business and after a thorough assessment, we decided to sell our three manufacturing sites in Russia. Until completion, which we expect will occur in the second half of our 2023 Fiscal Year, we remain committed to supporting our employees and customers, while preserving value for shareholders, through an orderly sale process. We are also proactively undertaking initiatives to help offset the future impact of the divested earnings, including optimizing our European footprint and adjusting our regional cost base.

With that, I'll hand over to Michael, who will cover the estimated impact of the sale on Fiscal 2023 guidance.

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Amcor plc - Full Year 2022 Results Conference Call, August 17, 2022

Michael Casamento

Thanks, Ron, and I'll begin with the Flexibles segment on Slide 6.

Performance throughout Fiscal 2022 was excellent across several different dimensions, as each one of our businesses responded quickly to the continued evolving market environment, implementing measures to recover high raw material costs, manage general inflation, improve cost performance and deliver increasing mix benefits.

Year to date sales of $11.2 billion includes significant recoveries of high raw material costs of $1.1 billion. The overall price/cost impact has remained a manageable headwind through this inflationary cycle, given the diversity of materials we buy, the multiple regions in which we consume those materials, and the leverage we get from our well-developed and deeply embedded capabilities which have enabled us to implement a range of pricing actions across the business in a timely manner. Excluding this raw material impact, we are very pleased with the organic sales growth which was delivered across all Flexibles business units, as well as the momentum built through the year as we focused on successful recovery of rising general inflation and optimizing mix benefits.

Organic sales growth was 4% for the year and 6% in the June quarter, representing the strongest quarter of growth for the year. The strong mix benefits, in part, reflect continued growth in priority segments, including healthcare, pet food, meat and coffee. We have made deliberate choices to focus on these segments and, through the year, have seen organic sales growth in the mid- to high-single-digit range across these categories.

More broadly, supply chain disruptions had a dampening effect on growth in certain high-value categories through the year, including in the June quarter. As a result, year to date and June quarter volumes across the Flexibles business were in line with last year. Faced with these constraints, we proactively took action in parts of the business to direct constrained materials to their highest value use, further enhancing mix.

In terms of earnings, Adjusted EBIT growth of 9% on a year-to-date basis and 11% for the June quarter reflects strong price/mix benefits and favorable cost performance. Margins also remained strong at 13.6%, despite an adverse impact of 150 basis points from the mathematical consequence of pass- through pricing for higher raw material costs.

Turning to Rigid Packaging, on Slide 7, the key messages today are that underlying demand has remained elevated across North and South America through Fiscal 2022, leading to continual sequential strengthening in our earnings growth in the June quarter in line with our expectations. On a year-to-date basis, reported sales grew by 20%, which included approximately 16% related to the recovery of high raw material costs. The 5% organic sales growth was driven by favorable price/mix benefits of 2% and volume growth of 3%.

In North America, year-to-date beverage volumes were up 1%. Hot fill container volumes increased by 2% for the year against a strong comparative period of double-digit growth and were up 4% in the June quarter, reflecting continued strength in categories like isotonics and juice. While leveraging Amcor's highly differentiated technology, design and PCR handling capabilities, we are well differentiated in adding significant value for our customers in the hot fill segment, which, over a multi-year period, has resulted in compound volume growth of around 5%, helping drive consistent mix benefits. Specialty container volumes continued to improve throughout the year, including in the June quarter, but on a full year basis remained below the prior year, which benefited from a strong first half in the home and personal care category.

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ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

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Amcor plc published this content on 19 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 August 2022 10:53:03 UTC.