Amcor Plc (AMCR) — Q4 2019 Earnings Call Transcript

Thanks Josh and welcome to Amcor’s 2019 year-end earnings call. This is our first call as a newly listed company following the Bemis transaction. So good evening to those of you in the U.S. and good morning to those in Australia. Joining me today in Australia is Ron Delia, Chief Executive Officer, and Michael Casamento, Chief Financial Officer. At this time, I'll direct you to our website amcor.com under the investor section where you'll find our press release and presentation, which will be discussed on this call. We've also discussed non-GAAP financial measures as we talk about performance. Reconciliation of these non-GAAP measures to GAAP measures that we consider most comparable can be found in the press release and presentation on our website. I would also remind you that statements regarding future performance of the company made during this call are forward-looking and therefore subject to certain risks and uncertainties. Actual results may differ materially from historical expected or predicted results due to a variety of factors. Please refer to Amcor’s SEC filings including a statement on Form S-4 to review these factors. With that, I'll hand over to Ron.

Thanks, Tracey and good morning and good evening. We've got a lot to cover here today. So we'll get right into it. And we'll start where we always start with meetings in Amcor, which is with safety. Safety is a core value at Amcor, and we have one goal, which is no injuries. And we're not there yet. But our safety performance over the last 12 months has been a real highlight, with reductions in lost-time injuries and recordable injuries of 29% and 25% respectively. This is a great outcome and a testament to our leadership teams and all of our employees around the world who’ve been able to stay focused on what matters most, despite the potential for lots of distractions during a very busy year. Again, the only thing that matters to us is getting to zero injuries. Just a quick word on these metrics, when we acquire businesses, they typically have a higher number of injuries than we're used to at Amcor and as a result, these metrics end up increasing for a period of time, and that happened a couple of years ago. You'll see that happen again during fiscal 2020 when we include the legacy Bemis in these numbers. But that said, our new colleagues are just as focused on safety. And pretty soon, we'll see fewer total injuries again as we march towards our goal of no injuries. Moving to the four key messages we have for today: first, 2019 from a number of different dimensions was a historic year for Amcor. We completed the Bemis acquisition, added a listing on the New York Stock Exchange, and continued to progress our sustainability agenda. At the same time, the base business has been performing well. The Legacy Amcor business delivered results in line with expectations, and momentum is building as we head into the 2020 financial year. Third, we have visibility to multiple sources of EPS growth. Our base business is defensive and will continue to grow organically. There are $180 million of synergies from the Bemis acquisition, and that integration is off to a good start. Because our balance sheet and cash flow outlook are strong, we have the confidence to redeploy divestment proceeds and a $500 million share buyback. As uncertainty and macroeconomic risks around the world seem to increase by the day, we have a clear path forward for the next few years to create value for shareholders. Finally, and the fourth key message today, we're extremely excited at Amcor because we're uniquely positioned for the long-term. We have leadership positions in each of our businesses, differentiated capabilities, scale, and global reach that we can put together to generate growth into the future. A big part of that future will be Amcor’s continued leadership on sustainability. We announced at least $50 million of additional investments to accelerate that sustainability agenda. Now before turning to the financial results for the year, just a word on the numbers that you'll see in the materials we released today. The basis for all the financial information is U.S. GAAP, but we'll focus on adjusted or non-GAAP metrics, which we believe is the best way to understand the operating performance of the business. When we describe our guidance for FY 2020, we’ll refer to a pro forma set of financials so we can compare apples-to-apples as if we owned Bemis for all of FY 2019. So moving on to slide 6, full-year adjusted financials, sales are up 5.5% in constant currency terms, or 3.2% if you exclude the added sales from the Bemis business. EBIT was up 5.7%, again in constant currency, with both the Flexibles and Rigid Packaging segments contributing to organic sales growth, strong cost performance, benefits from acquisitions that we completed earlier, and restructuring benefits. We continued our track record of consistent margin expansion with EBIT margins up 10 basis points, or 20 basis points when excluding the sales impact of the higher raw materials we passed through in the rigid packaging business, and net income was up 9% in constant currency terms. Excluding the Bemis earnings, the Legacy Amcor business delivered solid growth of 7%, which was in line with our expectations. Cash flow was strong at more than $200 million for the legacy Amcor business, and the balance sheet is also strong, so we increased the annual dividend to $0.455 per share. We initiated a $500 million share buyback today to further enhance shareholder returns. In the Flexibles segment, sales grew by 5.4% in constant currency terms or 2.1% excluding sales from legacy Bemis, with good growth in global healthcare and across emerging markets. EBIT grew by 6.7% in constant currency and margins expanded by 10 basis points. Organic profit growth also benefited from strong cost performance, particularly in the Asia-Pacific region and within the specialty carton plants. In the European region, overall operating costs were higher due to higher-than-expected demand in our healthcare plans. The final benefits from restructuring initiatives which we started in 2016 also drove profit, along with a small benefit from the normal time lag in recovering higher raw material costs, which was a little better than we expected six months ago. Lastly, we had profit growth from businesses we acquired in prior periods which was in line with our expectations. As we highlighted in our news release in the June quarter, the legacy Bemis business demonstrated similar financial performance to the previous three quarters, except for the business in Latin America, which delivered a marginal loss in the June quarter. Turning to Rigid Packaging on slide 8, sales grew 5.4% in constant currency terms, including a 3.7% favorable impact from passing through higher raw materials. EBIT grew 4.8% driven by a combination of higher volumes, favorable product mix, and benefits from restructuring initiatives. In North America, total beverage volumes were up 1%, and hot fill container volumes were up 7%. Overall sales growth within the regional beverage unit, which focuses on smaller customers and brands, continues to track at double-digit rates. Acquisition benefits in specialty containers were offset by disappointing cost performance in two classes, and the closures business was negatively impacted by startup costs at a recently commissioned plant in Mexico. Latin America volumes are up 3% versus last year, excluding Argentina, volumes are up 10% reflecting strong growth in Colombia, Mexico, and Brazil. Returns were almost 17% in Rigid Plastics, and overall we were pleased with the performance this year, and we believe the business is well-positioned for the future. With that, I'll hand over to Michael to talk about the cash flow and balance sheet.

Thanks, Ron. I’m on Slide 9 now, and in terms of cash flow, one of the highlights for the year was our working capital performance. The legacy Amcor business reduced the working capital sales ratio from 10.6% last year to 9% this year with improvements in a range of areas including payables and receivables days, which in turn reduced our average debt levels during the year and net interest expense in the P&L. We expect the working capital sales ratio will increase following the acquisition of the Bemis business but will then become a source of cash as we work the ratio back down over time. Capital expenditure was also lower than last year. We would typically expect capital expenditure to track in line with depreciation. Our spend was a little lower as we focused on the integration activities. Capital expenditure is also likely to be slightly lower than depreciation in the mid-2020 financial year as we work through the integration. Adjusting for Bemis-related transaction costs and an expert pro rata dividend paid in May, cash flow after dividends was $193 million or $207 million for the legacy Amcor business only, which was in line with our guidance range for the year. Turning to the balance sheet on Slide 10. As Ron mentioned earlier, Amcor’s balance sheet and financial profile remain strong. Net debt of USD 5.5 billion at the 30th of June has increased compared to last year, mainly driven by the addition of the Bemis debt facilities. Leverage, measured as net debt over combined EBITDA, was 2.7 times after adjusting for the impact of the divested businesses. In the last several months, our Treasury team successfully refinanced and restructured a significant amount of debt that was carried by both legacy businesses. We continue to be in a very comfortable position in relation to our debt profile, with access to a diverse range of funding sources and an appropriate combination of fixed and floating debt with a well-balanced mix of currencies, and no significant maturities in the next 12 months. Demand for Amcor credit has been strong, and the outcome will benefit net interest costs in future periods. We expect the net finance costs will be within a range of $230 million to $250 million in our 2020 financial year, which is approximately $20 million lower than the combined net finance costs for 2019. So in summary, Amcor continues to generate strong cash flow and has the balance sheet capacity to fund the buyback announced today, while retaining the ability to invest in growth and maintain investment-grade credit metrics moving forward. So with that, I'll hand back to Ron.

Thanks, Michael. I will just take a few minutes here to talk about the longer-term growth potential that we see for the company. If I refer to Slide 12, any discussion on growth for the future needs to start with corporate strategy. The message here on Slide 12 is that nothing has changed. I won't walk through this slide. The strategy has not changed at all. Our approach to capital allocation and deploying our cash flow has also not changed, that's on Slide 13. This is essentially our capital allocation framework. It provides some perspective on how we think about allocating cash for the benefit of shareholders over the long-term. The numbers have increased a bit given we're a bigger company, but there's not been any changes to this framework today nor has been for many years now. Through paying dividends, growing the base business organically in a defensive set of end markets, pursuing acquisitions, or returning cash to shareholders, over time value creation has been strong and consistent. A big source of that value creation in the near term is, of course, the Bemis acquisition. Turning to Slide 14 for a quick recap on the strategic rationale. The combined company is the only player now in Flexible packaging with a comprehensive global footprint. In addition to being truly global, we also have a scale and resource advantage in each key region around the world. Our customer and product portfolio now benefits from increased exposure to attractive market and product segments. These differentiated solutions can now be transferred across regions and leveraged across that global footprint. We’ve merged the capabilities and talent from both companies to create the industry's best team who are focused on delivering for our customers around the world. We believe the strategic rationale is highly compelling, and we also see the potential to generate significant value for shareholders as a result. The starting point for the shareholder value that will be created with the Bemis acquisition is the cost synergy opportunity, which is recapped on Slide 15. We’re pleased with how the integration has started. We've had the fast start that we planned for, and we can confidently reconfirm our expectations for the synergies this year, as well as the phasing of those synergy benefits over the next three years. In terms of procurement, we're taking a coordinated regional and global approach and quick wins are being actioned across both direct and indirect spend categories. G&A synergies are largely associated with reductions in headcount. We wanted to start that exercise quickly so we can get people focused on moving the company forward. To date, headcount has been reduced by several hundred people and that number will increase further. Regarding footprint, those projects tend to take a little longer. The financial impact will be more towards years two and three. We've already gotten moving on that as well. We've announced the closure of three sites so far with some others to follow shortly. We feel really good about where the teams are regarding the integration and the business and the position of the business that we acquired. As you'll be aware, we were required to divest some plants to secure antitrust approval for the overall Bemis acquisition. Those divestments are now complete. Since Amcor is in a strong financial position, we’re able to redeploy the proceeds from those divestments to create value for shareholders now, and into the future. Slide 16 outlines how we’re redeploying those proceeds. First, in terms of the $500 million share buyback that we've mentioned. When that's completed, we will reduce the number of shares outstanding by around 3%, enhancing future EPS for the remaining shareholders. We intend to start repurchasing shares in the coming weeks. We will repurchase shares on both the New York Stock Exchange and the ASX in the same proportion as the number of shares currently on issue on each exchange. Secondly, looking towards the future, we've also committed to making incremental investments of at least $50 million in strategic projects to accelerate our sustainability agenda. Moving to Slide 17, one of the most important organic growth opportunities for Amcor comes from increasing consumer demand for more sustainable or environmentally friendly packaging. We see this as an opportunity because we start from the premise that there will always be a role for primary consumer packaging for food and healthcare products. That primary packaging, the packaging that touches and holds the product, is what Amcor does today. Our packaging helps protect food and medicine, preserve and extend shelf life, and helps brand owners promote and differentiate their products. Over the years, consumers have come to expect packaging that works first of all and is lightweight, convenient, easy to use, cost-effective, and great looking. Now all of us have an additional expectation: packaging should have a responsible end-of-life solution that doesn't result in more waste, or ends up in landfill or erosion. We believe the way to address those growing requirements, particularly around waste, is through responsible packaging, and Amcor is uniquely positioned to lead the way and be part of the solution. As the industry leader, we have the scale and resources to innovate and develop new products. We’re seen as the partner of choice for collaborating with customers and other stakeholders. This is an exciting time in our sustainability journey. Looking at Slide 18, it's been a busy year. In 2018, we became the first global packaging company pledging to develop all of our packaging to be recyclable or reusable by 2025, to significantly increase our use of recycled materials, and to work with others to drive greater recycling of packaging. In 2019, we signed The New Plastics Economy Global Commitment, we established a sustainability Center of Excellence in Europe, introduced several new products with more sustainable properties, and used more recycled content in our products in both Rigid Packaging and Flexible packaging. We took a significant step forward by bringing together the two R&D leaders in our industry, extending our capabilities and reach globally. Our approach includes a broad range of alternatives in terms of our raw materials, using increasing amounts of recycled content. In our Rigid Packaging business, PCR content (post-consumer recycled content) is approaching 10%, and more products, including beverage containers, are reaching 100% recycled content. In Flexibles, we've made good progress as well, and we're testing films with up to 50% recycled material. We've commercialized products using bio-based plastics derived from renewable sources. Each year, our products use less material in the first place. Amcor’s success in light weighting has been a strong point of differentiation for a long time. This year alone, our light weighting efforts have reduced the amount of virgin resin we've used by 37 million pounds. Our total use of recycled resin and our consumption of virgin material have reduced by more than 5%. We’re making good progress on reducing waste. We now have a broader range of recycled products, and commercialization trials are underway with more than 20 customers. We're evaluating a variety of compostable materials, and our sales of reusable and refillable PET containers in markets with refill programs have doubled in the last two years. By 2025, we pledge to meet our commitments. We will ensure consumers and the environment benefit from responsible sustainable packaging. Amcor is continuing to grow and thrive. Before wrapping up, let me summarize on Page 19 our outlook for the 2020 financial year and what you can expect from Amcor in this transition year as we integrate the Bemis business and move to U.S. GAAP. For fiscal 2020, we’re guiding to an adjusted EPS growth range of 5% to 10% in constant currency terms. Using 2019 financial year average exchange rates, this implies a range of $0.61 to $0.64 per share. This includes $65 million of pre-tax synergy benefits, considering a marginal decline in the average shares outstanding through the buyback. Integration and transaction costs related to the Bemis acquisition and other items impacting comparability are excluded from our adjusted EPS guidance assumptions. We expect cash flow after dividends to be in a range of $200 million to $300 million after deducting cash integration costs of approximately $100 million. Consistent with most companies in our industry, we intend to provide annual EPS and cash flow guidance each year. We acknowledge that during a transition year like this one, additional metrics may be helpful. Our guidance is related to the full year and not by quarter, aligning with how we run the business. As we progress through the year, our discussion and narrative will focus on year-to-date performance. We will have investor communications each quarter and, consistent with past practice, provide a comprehensive management briefing every half year. Finally, moving to the last slide. FY 2019 was a transformative year for Amcor. The underlying business performed well, delivering solid earnings growth and building momentum across multiple areas as we enter fiscal 2020. Capitalizing on the value of the Bemis acquisition is one of our top priorities, and the integration is going well. We're delivering incremental synergy benefits every day. At a time, when there's arguably a higher degree of uncertainty in the world, this gives us clear visibility to near-term earnings growth, and we've enhanced the value delivered to shareholders today by increasing our dividend and announcing a $500 million share buyback. We feel good about that, but we're even more excited about the opportunities to use our differentiated positions to drive long-term growth and maximize shareholder value. That concludes our opening remarks and we would be happy to take your questions.

Hi guys. Hi, Ron, Michael, congratulations on closing the acquisition. Firstly, just like to touch a bit on the cash synergies you have floated out the number if I remember correctly $300 million in CapEx and working capital synergies, and I'd like to check, first of all, if this is on track and what this means for working capital and CapEx for fiscal 2020?

I’ll let Michael speak to 2020, but the short answer on the first question is absolutely on track. We had a great year in working capital performance last year at Amcor, and we expect to apply the same disciplines and degree of focus to the Bemis business. We know going through an integration like this, there'll be less capital that gets spent in the ordinary course. Michael, maybe you can just speak to the 2020 aspect of the question.

Yes, sure. As you saw, our working capital for the Amcor legacy business improved significantly in 2019, but will see an increase there because the Bemis business tracks around 12.5% to 13% working capital sales. That’s an opportunity for us, but clearly it takes time to get down. So bringing that down over time. On CapEx front, as Ron said, typically we’d be around that in line with depreciation this year. I'd expect we're probably going to be slightly behind that. There will be some benefiting the cash flow as a result of multiplying that level.

Great. Just a different question here. Obviously, in your rigid packaging PET bottles, you had a very good year, especially for the hot fill containers, but we have been hearing, I'm sure you have as well, that a lot of the beverage can companies are gaining market share and shifting companies to beverage cans away from plastics. You do have a slide about your very limited exposure to water bottles. What is your volume outlook right now? Can you sustain this growth in the hot fill business or perhaps growth will be creamed? Is there any chance that you can actually see this business contract in the next few years gradually? Or are you confident that these growth rates can be sustained? Thank you very much.

Yes, it's a really good question. The short answer is we feel really good about this business and how it's positioned for the long-term. The business participates across all liquid refreshment beverage categories in North America and in Latin America as well. It's broadly exposed, becoming more and more diversified each year. Within beverages, we've seen some slowdown in the water market, but only about 2% of our margin comes from water in the rigid plastics segment. So it's really not important for us now or in the future. Beyond that, we see 2% growth at least across all other beverage categories in plastic, and yes, there's a role for alternative substrates in different sub-segments. Going forward, we continue to see growth that looks like the growth we've seen historically in the segments we're playing in, around 2% for several years.

Good morning or good evening, guys. Thanks. Just one from me, Ron, I just wondered if you could talk about the guidance for the corporate line there. I think $130 million was the base we’re coming off. I would expect that that's probably one area where you might have had synergy opportunities as you collapse sort of two head offices into one. So interested in the growth for that - actually the outlook for that to actually grow year-on-year?

Andrew, it's Michael here. The starting point is kind of $135 million and we're expecting a $20 million, $25 million to $30 million increase there. Part of that is due to low insurance claims this year. We're guiding to a more normalized view on that front. We're also looking to take advantage of some investment into our commercial capabilities around Value Plus and Procure Plus and actually capture marketplace benefits.

Would you think that that's the sort of level we should be looking at for the next few years?

Yes, I think that's a reasonable place to sit.

To be clear, Andrew, on the synergy aspect to your question, absolutely our synergies in corporate. However, we're not looking for synergies in the commercial part of the company, which is sales and research and development. We want to double down and ensure we capture the marketplace benefits of this deal.

Hey, good morning. Good afternoon, guys and congrats again on getting the deal through. Just a couple of questions on the guidance. Just wanted to clarify a couple of things, just the EPS guide, I appreciate the $0.61 to $0.64, which I can assume is constant currency. Could you give a little bit of color on what impact current FX rates might have on that $0.61 to $0.64?

Brian, you have to do the math. I think about half of the currency impact is related to the Euro. The other half is a really broad mix of currencies across probably 15 or so that each would be about 2% or 3% of the impact. The impact is clear in terms of, Brian, what does it say on Slide 30 in the backup might be the best guide to look at.

Okay, let's take a look at that. And maybe on the cash flow guidance, I guess $200 million to $300 million after dividends. I'm wondering if you could provide some components within that, just wondering what you're assuming for working capital as a meaningful source of cash and do you include proceeds from divestments of around $395 million or cash in the healthcare sales? If there's a specific CapEx number, would appreciate that.

Yes, the range we put out is $200 million to $300 million after cash integration costs of around $100 million. We don’t typically break down components of that but the guidance on CapEx is typically aligned with depreciation.

You can think about it as $300 million to $400 million before integration costs, which is a step up from where Amcor has been historically.

Good morning, guys. How are you?

Hey, John.

Just had a couple of questions. Just in terms of the guidance, just wanted to confirm that the guidance assumes some base business growth there. What do you see as the key drivers of that?

Yes, absolutely, the base business is going well. We finished FY 2019 with good momentum and a strong second half. We expect growth into FY 2020. That includes $65 million of pre-tax synergies. The organic growth comes from modest top line growth, more in emerging markets, continued margin improvement, and benefits from legacy acquisitions, which will add value as well. We have multiple levers to generate growth on the base.

Thank you. Just the second question on some of the new product initiatives, especially in Flexibles. What do you see as the opportunities there and how is that changing things?

The level of interest among customers for these products is unprecedented. The nature of the dialogue with the customers in terms of the breadth we’re engaging them and the importance they're placing on getting these materials tested and in trials has been great. Nonetheless, nothing moves quickly in this space regarding new product development. Testing can take six to 12 months before commercialization. But leading indicators are positive. The customer inquiries, trials, and testing that are being done have been significant. Those products will generate top line growth two to three years from now, but now is the time to start the process.

Thanks, Ron, thanks, Mike. A question on Rigids if I can. Looking at the volume performance, very good considering the data we're seeing. However, it doesn't seem like the EBIT growth reflects much operating leverage. Can you explain any impedance to that? You also had cost savings coming through, so maybe it should amplify EBIT growth?

First of all, in volumes, there is mixed data out there. Our business is geared towards the segments that continue to grow. Our performance was 5% growth in constant currency terms. We had flat volumes in beverage across the board with positive mix and good growth in Latin America, but some plants didn’t perform well, hindering our results. Generally, we're pleased with the year with 5% constant currency growth despite those challenges.

Which plants were they again, or what was the issue?

Two legacy plants with operational issues, which is common when you have 150 plants. Occasionally, a couple don't perform as well.

Understood. On the sustainability investment, is the $50 million all CapEx or will some of it be OpEx?

This would be mostly capital investments. Specifically, that investment includes R&D infrastructure and some capital equipment to process more recycled content. We're also active in our partnership network, including the recycling partnership in the U.S.

On Rigids, I noticed that Pepsi seems to have a greater reliance on plastic containers than Coke. Just wondering if that's your observation too and can that change over time?

I'm not sure I observed that distinction. Coca-Cola has a unique operating model with their Co-Op network. Dialogue with beverage customers is similar regarding the drive to smaller portions and pack sizes in Rigid Plastics, which are the primary sources of growth for these products.

Hi, Ron, Michael. Thanks for the opportunity to ask a couple of questions. Just wanted to delve into your pledge to have 100% of your products recyclable or reusable by 2025. Do you include compostable products within that pledge? And secondly, what percentage of your products are currently recyclable or reusable today?

Compostable products are part of our mix, but they're a very small percentage. We hesitate around that because compostable doesn’t necessarily mean recyclable. 97% plus of our Rigid Plastics products are recyclable. In Flexibles, we can’t provide a specific number as it varies by infrastructure, but we make good progress each year to ensure all our products are technically recyclable. Our role is also to ensure that the necessary recycling infrastructure is in place, which requires broader involvement than Amcor alone.

Which products do you think face the greatest challenges? Are there particular products without current solutions?

I don’t see any insurmountable challenges for our products. It’s a matter of time and development. We believe we can develop solutions for nearly all our products in five years.

Is five years enough time?

Absolutely. The technical part is solvable, but whether the recycling infrastructure exists globally in five years is uncertain. However, Amcor will have done its part by 2025.

Good morning everyone. Just a couple of questions on raw materials. Ron, can you discuss your outlook for raw materials? Is it becoming a headwind? You mentioned resin headwinds totaling over $15 million. Have you recovered that at this point, and is more to come into FY 2020?

The second question is shorter; the $50 million is above our usual $100 million R&D spend. We're recovering from a $5 million modest benefit this year, and raw materials are a mixed picture.

Hi, thanks for taking my follow-up question. The legacy Bemis business seemed a little bit weaker in the quarter. I wondered if you could expand a bit more on how it performed overall and the outlook for growth outside the synergy capture?

The Bemis business has performed well and continues to build momentum. The North America and overseas businesses in healthcare performed well, but Latin America faced challenges and caused a marginal loss, a result of weak volumes and no cost flexing. It's fixable over time, and the business made money in July.

Just a last one from me on sustainability. How much do you think is solvable through science versus re-educating consumers on their perceptions about plastic? Is there anything you can do from a marketing approach?

First, we can manage the product side and make all of them recyclable or compostable. However, education largely revolves around recycling and requires broader infrastructure development. While consumer preferences generally show growth in our segments, we must continue to promote responsible packaging.

Just a quick question on the Bemis integration process. I imagine efforts are directed mostly at driving cost synergies. At what point will those efforts start to shift towards revenue synergies?

You're correct. The focus is currently on cost synergies because those are discrete projects that can be banked immediately. In parallel, the commercial organization is always thinking about how to grow. While the integration efforts are underway, growth conversations are happening, especially with the new tools at their disposal. However, new products will take time to commercialize.

Just a question on working capital. What was the ending working capital balance for the legacy Amcor business?

We’ll have to follow up on that. We’ve closed the books on a combined basis, so we need to untangle legacy Bemis and legacy Amcor particularly from a balance sheet perspective.

That's fine. I guess then a question on Sonoco and Alusa. Can you talk about how these two businesses are tracking relative to acquisition targets and quantify benefits expected in FY 2020?

We received benefits from both in FY 2019. For Alusa, that was a big driver of acquisition-related profit uplift. In FY 2019, we’ll see more value next year although the overall profit will take longer to realize due to no top-line growth in Latin America, which is challenged. Sonoco has delivered value in 2019 and will deliver more in FY 2020.

Thanks, Ron, for the follow-up question. Regarding the specialty cartons business, it seems to defy trends, particularly in America where cigarette volumes have been weak, yet you’re calling out higher volumes. Is that due to tobacco packaging or other forms of specialty cartons? How is the growth being achieved?

It’s a business that needs examination. The business does well with improving its mix, capturing share, and diversifying into specialty folding cartons for other markets. There's growth from the alternative reduced-risk products in Europe and Asia. Overall, we’re pleased with this segment's performance.

Yes, hi guys. Thanks for taking my follow-up questions. Going back to Bemis, you mentioned strong performance in North America and the rest of the world. Specifically regarding volumes and restructuring program – how is that process going? Is it performing as expected?

Yes, the Agility restructuring program has been executed well and is behind them. The top-line growth follows a similar trajectory as the Amcor business, generally around 1% to 2% growth. The focus on smaller customers has been the right approach and strategy.

With this acquisition, you’re increasing your footprint in North America. Are there areas where you can invest in new lines of business in Flexible packaging?

We’re happy with our portfolio in four product categories. We’re not adding new products beyond Flexibles, Rigids, closures, and cartons. However, we see opportunities for improvement, especially in healthcare packaging, and we'll focus our growth there. Thank you to everyone who participated in the call this morning. Thank you for your questions. We will end the call there.