Amcor Plc (AMCR) — Q3 2021 Earnings Call Transcript

Thanks, Tracey, and thanks, everyone, for joining us today to discuss Amcor's year-to-date results. Joining me on the line, as Tracey indicated, is Michael Casamento, our Chief Financial Officer. And we'll begin with some prepared remarks and then open the line for Q&A. Starting with Slide 3. We begin every meeting at Amcor with safety, so we'll start today with safety as well. This year, our safety performance has been a real highlight. Across Amcor, we've reduced the number of injuries by almost 30% in the first 9 months of the year, and all of our business groups reported fewer injuries, with over half of our sites remaining injury-free for the last 12 months or more. Of course, over the last year, we've also been equally focused on keeping our co-workers healthy as well as safe. As the COVID pandemic continues to present challenges in many countries, maintaining our protocols and our vigilance remains a top priority for our teams around the world, who also understand the critical role we play in helping maintain the availability of essential healthcare and food products. Given the continued challenges of navigating the pandemic, we're particularly pleased with our safety performance so far this year, and we remain confident that our objective of no injuries is, in fact, possible. Our key messages for today are set out on Slide 4. First, our year-to-date financial results have been strong and ahead of expectations, with organic momentum continuing through the year such that the March quarter has been our strongest thus far this year despite the operating environment remaining dynamic and volatile, maybe even more so over the last few months. Our teams have navigated that volatility by demonstrating an exceptional ability to stay focused on the key business drivers within our control, to respond quickly as conditions change, and to execute to deliver results despite the circumstances. The second message here is that the strong performance translates into higher expectations for the 2021 fiscal year, and we've raised our outlook for full-year EPS growth to 14% to 15% on a constant currency basis. And third, we're actively investing in several growth initiatives, which illustrate the range of opportunities we have over the medium term to maintain our momentum. The strong result, increased guidance, and growth investment examples demonstrate the strength of our investment case, which I'll touch on briefly on Slide 5 before returning to the results in more detail. The Amcor investment case is set out on Slide 5, and it's one we've shared a few times this year. We believe the investment case is as strong as ever, and this slide sets out the reasons why, including our global leadership positions, consistent growth from attractive end markets, strong balance sheet and significant annual cash flow of more than $1 billion, growing to fund growth investments and dividends. Lastly, momentum's been building, which you can see in our upgraded guidance, and we believe that will continue. Looking ahead into fiscal '22, we would expect EPS growth to benefit from continued organic growth, additional synergies from the Bemis acquisition, a lower share count after the repurchases during FY '20 and '21, and the value that will be created from the $300 million to $400 million of free cash flow that will remain after CapEx and dividends. So the Amcor investment case has not changed and that's part of the message here today. Despite volatility in our operating environment and maybe even more so because of that volatility, the Amcor investment fundamentals remain very attractive and will continue to generate total value of 10% to 15% each year across EPS growth and dividends. Slide 6 presents the actual results of our investment case over the past decade. Throughout this timeframe, we have consistently maintained an investment-grade capital structure. We have achieved steady sales and profit growth, including organic margin expansion through various economic and commodity cycles. Additionally, we have reliably provided a strong dividend. This growth and yield have been supported by exceptional free cash flow conversion and return on invested capital, contributing to substantial total returns for shareholders. Organic growth has always been a vital factor in our overall financial performance, and this will become increasingly apparent in the future. Slide 7 outlines three primary organic growth drivers for Amcor. The first is the range of expanding end markets we serve globally. Amcor holds significant positions in several high-growth, high-value, more packaging-intensive sectors such as healthcare, protein, and premium coffee or hot fill beverage containers and barrier films. In each of these areas, market growth tends to exceed the average. We possess differentiated positions, large-scale operations, unique products, and opportunities for global leverage in each segment. Secondly, emerging markets will continue to be an important source of organic growth for Amcor. We have a substantial emerging markets portfolio generating over $3 billion in annual sales from 27 profitable businesses, where we hold leadership positions and differentiated capabilities, backed by a long history of profitable growth. Thirdly, innovation-driven growth remains a key area where we distinguish ourselves from the competition, and we are investing to strengthen that advantage. All of our businesses utilize world-class innovation and R&D capabilities, which our customers increasingly value as they seek packaging solutions that address evolving consumer needs worldwide, especially concerning sustainability, a topic I will revisit shortly. We're also allocating capital and actively investing for growth in a number of areas, and Slide 8 shows 2 examples. First, the example on the left. Within a few weeks, we will expect to begin commissioning a major capacity expansion for one of our aluminum-based product segments at a Flexibles Packaging plant in Switzerland. This investment will support the continued high growth of the premium coffee segment and is underwritten by a long-term supply agreement with a key customer. We've made a number of similar investments over the years and several recently where we have real long-term partnerships with higher-growth customers who value the various ways Amcor can help them grow. In the other example on the right-hand side of the slide, in the last quarter, we began construction of a new greenfield plant in China to add capacity to our business in that high-growth market, where we already maintain a leadership position and a healthy financial profile. The new state-of-the-art plant will be the largest in Amcor's China network and will start up by the end of calendar 2022 to support a range of global and local customers, primarily in the food and personal care segments. And turning to Slide 9. Last week, we announced a corporate venture-type investment in ePac, a relatively new startup in the flexible packaging space, which has leveraged technology and a unique business model to grow to $100 million in sales in just over 4 years. As excited as we are to work with ePac, the key point of this slide is to make clear our intentions to do more with regard to open innovation and corporate venturing generally so that we can complement our internal innovation capabilities with great external ideas from all around the world. We're looking forward to exploring opportunities across new packaging products, processes, and business models and will be much more systematic and purposeful in this area. And moving to Slide 10, it remains very clear to us that our best and most exciting opportunity for growth and differentiation will come from the development of more sustainable packaging. More sustainable packaging means responsible packaging, starting with better package design. On that dimension, which needs to take into account the full product life cycle, there's no one better positioned in the industry than Amcor, and we're demonstrating that with a steady stream of new product platforms and launches around the world. Waste management and consumer participation will be equally important, and both require close collaboration with others across our value chain. Amcor has been actively partnering with others in both areas to drive scalable solutions and real impact, and I'll describe some of the progress we're making on the next slide. The KITKAT example on the left is a great one because it demonstrates the potential for Amcor to use chemically recycled resin in food-grade flexible packaging, and it also highlights the level of collaboration that's possible across the full value chain to make it happen, in this case, in Australia. In the middle is AmSky, which is a breakthrough innovation launched by Amcor just last week. Amcor created the world's first recycle-ready thermoform blister packaging by eliminating PVC without compromising functionality or the consumer experience. AmSky is an exciting development, which has the potential to transform the sustainability profile of healthcare packaging, particularly for solid-dose pharmaceuticals, but it also highlights the potential to eliminate PVC in other packaging segments as well. The example on the right-hand side of the slide is another one that brings to life the concept of responsible packaging with a real example in practice, in this case, in the U.K. The supermarket rollout of this rice product in a recycle-ready microwavable pouch made with Amcor's HeatFlex technology coincided with a number of U.K. retailers announcing in-store trials to collect and recycle flexible packaging. This one demonstrates that responsible packaging design enabled by Amcor can catalyze change and motivate progress on the waste management and consumer participation requirements as well. In March, Amcor also took an Executive Committee role in the Alliance to End Plastic Waste, a group whose mission is fully aligned with our vision for responsible packaging through design, infrastructure, innovation, and consumer participation. Turning now to a summary of our results on Slide 12. The business has delivered strong year-to-date earnings growth, with EPS up 16% on a comparable constant currency basis. Of that EPS growth, 7% was organic as overall demand for our products has remained healthy and combined with outstanding execution has resulted in organic growth continuing to build each quarter. 6% of the EPS growth comes from incremental Bemis acquisition synergies, which have reached $55 million so far this fiscal year. We continue to progress ahead of initial expectations, and we’re well-positioned to deliver at least $180 million of synergies by the end of fiscal '22. The remaining 3% EPS growth reflects benefits from share repurchases in fiscal '20 and '21. Free cash flow in the balance sheet continues to be strong and in line with our expectations. We’ve returned more than $850 million so far this year of cash to shareholders through higher dividends and share buybacks. So the key message here is that we're executing very well, building momentum, delivering strong growth and cash returns to shareholders. With that, I'll hand over to Michael to provide some further detail.

Thanks, Ron, and hi, everyone. Starting with the Flexibles segment on Slide 13. Overall sales were 1% higher than the prior year, and this was all driven by higher volumes. Demand has remained relatively broad-based, with growth in North America, Latin America, and the Asia Pacific regions, while Europe was in line with last year. Through the last 9 months, we have consistently seen solid growth across a broad range of end markets, including in higher-value end markets like protein, coffee, cheese, and pet food. This has been partly offset by lower healthcare volumes driven by fewer elective surgeries and lower prescription trends, which began back in the June quarter of 2020. Adjusted EBIT has grown 9% in constant currency terms, and margins expanded by 110 basis points, reflecting volume growth, $45 million of cost synergy benefits, and strong cost performance and management. It's worth noting that increases in raw materials have remained manageable, given the diversity of the materials we buy and the multiple ways in which we consume those materials, combined with the strong commercial capabilities that we have built for over a decade as part of The Amcor Way. The business also continues to extract the financial and strategic benefits from the Bemis acquisition, which is covered on Slide 14. We acquired a high-quality, well-invested business that has delivered consistent earnings growth since the date of the acquisition. In terms of cost synergies, our teams have done a great job of delivering benefits from overhead reduction, procurement, and by optimizing our footprint. Year-to-date, we have delivered $55 million in benefits, and we continue to expect this will increase to approximately $70 million for the full year. At the end of fiscal 2021, cumulative benefits will have reached $150 million, and we expect to deliver at least $180 million of total cost synergies by the end of fiscal '22. It's also exciting to see examples of collaboration across the regions as we leverage our capabilities and differentiated product offering to support customer growth. For instance, our business in China, Australia, and Brazil have all secured differentiated packaging for protein and pet food applications from other Amcor regions across the globe. There are many examples like this, and more are in the pipeline to come through. Turning to Rigid Packaging on Slide 15. In summary, the business has continued to deliver outstanding results driven by strong consumer demand. Sales growth included a 4% increase in volume as well as a 3% price/mix benefit, including higher pricing to recover cost inflation in Latin America. In North America, year-to-date beverage volumes are 7% higher than last year, and hot fill container volumes are up 13%. We've seen another quarter of strong consumer demand for PET packaged beverages, particularly in hot filled categories, including juice, ready-to-drink teas, and sports drinks. This strong demand has built capacity across our network and reflects higher consumer demand, innovative brand extensions, and new product launches and formats. Year-to-date, Specialty Container volumes were higher than the prior period, with growth in certain categories, including spirits, personal care, and home cleaning. Volumes in Latin America were also 2% higher than last year, with growth delivered in Brazil, Central America, and Argentina. The EBIT growth of 9% reflects higher volumes and favorable mix across the business.

I don't know if it's disconnected, operator. Just give us a second here. We'll see if we can get him back on. I'll pick it up from here. It's Ron Delia. I'll just pick up from where Michael left off. Michael was summarizing the Rigid Packaging segment. Sorry about that, for those on the line. I think he was updating on the Specialty Container volumes, which were higher than the prior period, with growth in several categories. Volumes in Latin America were 2% higher than last year, with growth particularly in Brazil, Central America, and Argentina. EBIT growth in the segment of 9% reflects that higher volume and favorable mix across the business, partially offset by higher labor and transportation costs as well. It has become clear that there is a preference for Rigid containers, given their recyclability, lightweight nature, resealability, hygiene profile, and the lowest carbon footprint. The business has continued to benefit from these trends. We've doubled the use of post-consumer recycled resin over the last 2 years, even while navigating the pandemic. We continue to launch new products made of 100% PCR. In fact, today, almost all of our sites in North America are converting to PCR along with virgin resin. Moving on to Slide 16, adjusted free cash flow of $360 million was in line with the prior year. However, this includes around $50 million of U.S. cash tax payments deferred under the CARES Act in the fourth quarter of fiscal year 2020. Excluding that timing variance, adjusted free cash flow is about 10% higher than last year and meets our expectations. Our financial profile is solid. Leverage is at 3 times on a trailing 12-month EBITDA basis, which is lower than last year and aligns with what we anticipate at the end of the March quarter, given the seasonality of cash flows in the business. Strong annual cash flow and a solid balance sheet provide the business significant capacity to invest and return a substantial amount of cash to shareholders, as we have this year already, through a growing dividend and further share repurchases. In fact, in the 9 months so far this year, we've returned over $850 million to shareholders.

Turning to the outlook slide, you'll find an updated and increased forecast for the year. The ongoing strong performance of the business and the organic momentum we have been building give us the confidence to raise our full-year guidance for 2021. We anticipate constant currency EPS growth of 14% to 15% for the entire year, which is comparable to and higher than the 10% to 14% guidance provided in February. This includes an unfavorable EPS impact from businesses we have divested over the past 12 months of about 1%. To clarify, the constant currency EPS growth for this year would have been 15% to 16% had the divestitures not taken place. Regarding cash flow, we continue to expect adjusted free cash flow to be between USD 1 billion and USD 1.1 billion. In closing, Amcor has achieved strong results that exceeded expectations, and the organic momentum has persisted. This has led us to raise our expectations for the full year. We are actively investing in the future, and these investments, along with effective execution, will sustain our momentum and strengthen our belief that the Amcor investment case has never been stronger.

Operator, with that, we'll finish our opening remarks, and we're happy to open the line for questions.

I have two questions, both focused on volume. First, it seems like every week there is a new press release from Amcor about a new product. Could you provide some kind of vitality index or an estimate of what portion of your current sales is coming from products that were not developed two or three years ago, or whichever timeframe you prefer? That's my first question. For my second question, I know you prefer to analyze things on a year-to-date basis, but when I look at the press releases and compare this quarter to last quarter, it appears that Flexibles experienced a slight slowdown, with volumes being flat or slightly down. Can you share what was occurring in the third quarter by market and highlight some key products?

Yes, that's a good question, George. Regarding the volatility index, we don’t extensively use that measure within the company. Our primary focus is on launching products that can be commercialized and have market acceptance, and then we track the sales of those products, none of which are significant to the group as a whole. However, we believe it is vital to show the strength of our innovation pipeline, as it will ultimately contribute to the favorable mix and margins we aim to achieve in our business. The best indicator of our vitality is the margin expansion we have consistently delivered for over 10 years. This indicates that each new product we sell today has a higher margin than the ones it replaces from earlier periods. That answers your first question indirectly. As for Q3, we will discuss that. We generally prefer to look at the full year to provide a long-term perspective. Nonetheless, the third quarter was our strongest quarter of the year in several respects. We experienced growing organic momentum and profit across both Rigids and Flexibles, and we are very pleased with our performance, especially since the operating environment in the third fiscal quarter has been challenging this year. In terms of sales, I expect that Rigids and Flexibles will achieve low single-digit growth in the long term, which is consistent with our performance over the past six months and what we anticipate will hold true by the end of the fiscal year. The 90-day period in Q3 was somewhat softer for Flexibles, primarily due to ongoing weaknesses in medical device packaging and pharmaceutical packaging. Overall, we remain aligned with our long-term trends in both sectors for this fiscal year, targeting low single-digit growth.

I guess, Ron, just kind of following up on George's question in terms of the cadence of volumes as we look ahead. Some CPG companies, as they reported, have talked about an abrupt sort of shift in terms of volumes as you cycled through the tougher comps from a year ago. Mobility in certain parts of the world is starting to increase, in North America, for example. So can you just sort of give us a real-time pulse as to what you're seeing so far in your 4Q, and then how exactly you expect volumes to sort of evolve over the next 2 to 3 quarters?

Yes, that's a good question. Last year around this time, we would have noted a largely neutral impact from COVID, which continued into the fourth quarter of FY '20. This experience was influenced by the geographic diversity of our business. In last year’s Q3, we faced significant negative impacts in Asia, especially in China, a key growth area for us. Other parts of our business showed some softness, which balanced out the stronger sales in North America during March of last year. Overall, last year didn’t present significant changes. As we look at the current year and the results we're discussing today, there isn’t much difference related to COVID from one period to another. Moving forward, I would maintain this perspective. As I mentioned in response to George's question, our Q4 will conclude this fiscal year in the low single digits, which is consistent with our expectations for any given year. It may not be the most exciting response, but it reflects the reality of our diversified portfolio. Yes, it's a good question and a key topic this period. First of all, this isn't new; these commodity cycles happen every few years. Over the past decade, we've likely seen three or four significant spikes in our input costs. It's something we periodically manage with a lot of rigor and precision, which improves each time we experience these cycles. Whether it's shortening the pass-through lags on contracts or expanding the range of materials affected by rise-and-fall mechanisms, we learn and adapt every year. I can point to lessons learned from each cyclical peak we've faced, ensuring that each subsequent experience is less impactful. Right now, we're facing some headwinds, like everyone else, but it's not significant enough to distort our results or hinder our expectations for the fiscal year. The acquisition of Bemis has also enhanced the diversification of our spending. In our two business segments, rigid packaging is largely PET-based and operates with tighter lags, making it easier to manage since it focuses primarily on one material. In contrast, in Flexibles, it's essential to note that around 40% of our purchases are not polymer-based; they include aluminum, fiber, and other materials. Our commodity spending is quite diversified. Specifically, in polymers, the remaining 60% is spread across four geographic regions and various grades. The addition of Bemis, which generates $4 billion of the $9 billion in sales for that segment, creates a more balanced portfolio effect. In summary, we're better equipped to handle these cyclical spikes, and our portfolio is strategically positioned to withstand them.

Ron, I would like to follow up on your comments about raw material price lags. I'm trying to grasp the impact these lags have had on your revenue, particularly regarding low raw material prices. This seems to affect both your segment and the group as a whole, negatively influencing performance throughout 2020 and into 2021. Considering that most raw material prices began to rise again around the middle of last year, it appears that the negative impact on your revenue continued for an additional nine months. Is it really that straightforward, or how should we interpret the lag?

I think the lag in Flexibles is approximately a quarter, typically averaging between 3 and 4 months, and this has remained consistent over time. With the addition of the Bemis portfolio, this aspect has not changed significantly. It's important to remember that during the past 9 to 12 months, there were instances when raw materials decreased in some regions. I wouldn't place too much significance on that. Bridging the commodity charts with the raw material impact on the revenue line is quite challenging, which is why we present it separately. Our measurement of organic sales growth does not include the effects, whether positive or negative, of commodity prices. I mean none of that is necessarily a bad thing. The consumer behavioral shift required for reuse at scale is just not something we've seen anywhere in the world yet. It doesn't mean it won't happen, but that’s a big ask of the consumer at this stage, quite frankly, when we are trying to get them to recycle or compost.

Ron, when you first gave fiscal '21 guidance last year, I think you guided to 5% to 10% EPS growth in the $1 billion to $1.1 billion in free cash flow. You've now raised the EPS guide a couple of times. I think you're basically double the original guide at the midpoint in terms of EPS growth. The free cash flow is still that sort of $1 billion to $1.1 billion. I understand it's not a huge delta, but is there any kind of like working capital impact from resin that maybe you get back in fiscal '22? Or is there something on the CapEx side? Just wondering how we should think about you being maybe at the low end or the high end of that free cash flow guide.

Yes. No, it's a good question. Michael is actually back, so we'll let him tackle that one.

Yes. Hi. Can you hear me there? Yes. Perfect. No, yes, look, you're quite right. The guidance has increased through the year, and we're still talking about a cash flow range of $1 billion to $1.1 billion. We think we'll be at the upper end of that range. But that said, clearly, the raw material escalation will have some impact on working capital as we just cycle through those increases and get them out into the marketplace. So really, that's the reason why we're sticking with the $1 billion to $1.1 billion. As I said, we think we can get to the upper end, but let's wait and see what happens with any further raw material movements. But that's really the simple answer.

Yes. Look, I think you're right to call it the trends. I mean the business hasn't had much of an impact. I know we've sort of sounded like a broken record on that point because we don't have a whole lot of exposure to the foodservice side. The place where we have a little bit of exposure is the convenience channel in Rigids, where you saw some softer sales at times last year. The offset to that has been the healthcare segment. The 2 just about net. As far as trying to find a comp and whether it's a negative or a positive, there's just not a whole lot in it for us. I think you're going to see volume growth at the end of the year that's consistent with our long-term averages. We're having, obviously, a pretty good year in Rigids, with positive mix on the hot fill side. That's really driven by just the consumer demand in some of the hot filled sports drink, juice, and tea segments more than anything else.

Firstly, I wanted to see a little bit with your fiscal 2022 starting in less than 2 months from now. How should we think about the earnings grade, some big key items, key buckets for EBITDA? And I know you have additional Bemis synergies. There’s going to be accretion from buybacks. But any other things we should consider as we look into next fiscal year?

I believe you outlined the key components of the situation well. The business is expected to achieve organic growth in the range of mid-single digits, around 3% to 4%. This year, we've seen an acceleration in organic momentum. As for Bemis synergies, we anticipate reaching about $70 million this year, following $80 million last year, and we're on track to achieve at least $180 million moving forward, so you can form your own expectations for next year. It's also important to remember that this business will generate substantial cash, anticipated to exceed $1 billion next year, leading to a surplus of $300 million to $400 million after capital expenditures and dividends. We will put that surplus to good use, as we have historically engaged in acquisitions and share repurchases. Therefore, you can expect some beneficial actions for shareholders with that additional cash. Well, let me answer the first part, and then I'll come back to folding cartons. Look, we're going to be active acquirers, there's no question about it. We've done about 30 deals over the last 10 years, and I hope we do at least that number over the next 10 years. That will be part of our playbook. This is an industry where, even despite leadership positions across our portfolio, there are still lots of bolt-on opportunities across Flexibles and in Rigids. Some areas that we would like to double-down on, or that represent bigger opportunities for us, I mean, obviously, Flexibles in Asia. We have a business that’s well over $1 billion in sales, but the market opportunity is enormous. So hopefully, we can supplement our growth there with M&A as one example. Probably another one would be in the Rigid Packaging space outside of beverage. We've got a big business growing well organically, but can we supplement that with further M&A? We certainly hope so. So those would be a couple of examples. But there's bolt-on opportunities across the board, and we really hope to be active. On folding cartons, it's a business that's about 8% of sales in Amcor. It's the industry leader in what it does because it's a very specialized type of folding carton, high-graphic intensity and shapes and tactile features as well. So it's sort of at the high end. It's not cereal boxes per se. So it's a high-margin business that generates a lot of cash. It's pretty core to our Flexibles perimeter because it's essentially a printing and converting business. Industrially, it looks exactly like our Flexibles businesses. In fact, some of the equipment is actually the same. It’s every bit as core as everything else, it's got a great financial profile. It's obviously got a different top line profile than the rest of the company. From a return on capital and cash perspective, it's about as good as it gets.

So I guess, first question, just thinking about kind of business trajectory. I was hoping you could maybe give us a bit of a split by geography in terms of what regions, especially EM versus developed markets. You talked about some of the volume kind of weakness in health care, any sense on when comps ease there and visibility to business activity kind of picking up, especially in the U.S.

Health care is a strong long-term growth sector. It has significantly contributed to growth for an extended period, encompassing both medical devices and pharmaceuticals, each boasting excellent financial attributes and growth rates surpassing those of traditional FMCG sectors. I am confident that this will rebound, particularly as we see positive indicators in developed markets, which were most affected by COVID. Our operations in this sector are global, with significant presence in Europe and North America, where the impacts of COVID led to fewer elective surgeries and lower prescription rates. However, I believe we are beginning to emerge from those challenges. In the coming quarters, we should witness a normalization that will positively contribute to growth. Other segments will grow at low single-digit rates. The comp comparisons are less significant across the rest of the company, aside from the negative effects from the health care situation I mentioned. Yes. I believe the approach we are taking is intentional. I will discuss ePac shortly, but the key takeaway is that we plan to be much more deliberate and systematic in exploring various external ideas. We are confident that our R&D capabilities are unique, but we also recognize that we do not have all the great ideas. Essentially, we are open to collaborations with anyone who has a promising idea they would like to develop with us. ePac represents a corporate venture investment; it’s a minority stake in a startup that is about four years old. It’s an impressive company, really exciting, focused on flexible packaging. It has grown remarkably from zero to approximately $100 million in sales in just four years, and it operates around 15 sites, mainly in the U.S., with a couple located internationally. We are eager to learn from this experience. Our initial goal is to observe and not intervene too much. We hope to gain insights in several areas. One is their commercial strategy, which you mentioned focuses on smaller businesses and makes use of short runs, quick turnarounds, and high quality. This presents a valuable commercial learning opportunity for Amcor. Additionally, the business benefits from digital printing and other innovative industrial practices within the plant, which are also appealing to us. Lastly, we want to understand how this company achieved such rapid growth in just four years. As a large corporation, there is much we can learn from a startup in terms of management and organization. For now, we plan to give it some space, observe, listen, and learn. Over time, the insights we gain will positively impact Amcor for years to come.

I also had a question about ePac and raw materials, so I will continue the ePac conversation. 0 to $100 million in sales in 4 years, that's, as you say, incredible. What does it say about the size of that market? Can you give us some color about how big that small customer market is and really, what the opportunity is?

I think it indicates that the market is quite significant. I wouldn't attempt to give an exact size for it. The figure I mentioned is primarily based on the U.S. market, and you can extend that thinking to include other regions globally. It certainly appears substantial. At this point, I'm uncertain about how much of that growth from 0 to $100 million is generated from new customers versus the expansion of existing customers as they move beyond larger multinational FMCG companies. Both aspects are essential. To directly answer your question, Larry, I'm not confident that we can provide a precise size for it.

The first one, Ron, just following up on Adam's question previously on raw materials. I think in the disclosure, it talked about an unfavorable impact of revenues in the 9 months. Certainly, as raw material prices have increased then, the impact on sales should be favorable within the third quarter of FY '21. So just wondering if you could narrow it down just to give us a sense of whether raw materials did contribute favorably to sales and whether there was indeed an impact or not in the third quarter. As we look into the fourth quarter of fiscal year '21 and the initial quarters of the next financial year, whether there will be any impact from raw materials.

Yes. I mean absolutely. The short answer is yes. So in the third quarter, in the Flexibles segment, you'll see a positive impact from raws, and I would suspect that will be the case in the fourth quarter as well.

Look, we typically would spend 3.5%, 4% of sales on CapEx. Last year being the first year after an acquisition like Bemis, it was a little lower than that so we were around the $400 million mark. I think this year, this FY '21, we'll finish the year probably about 10% higher than that. As we look forward, we can manage these investments of this kind within our CapEx spend, and you should expect that the CapEx is going to be somewhere around 3.5% to 4% of sales, probably getting closer to $500 million as we move forward. We're quite pleased to be able to invest in these activities because they generate growth, they get good returns, and they really help us support our customer base as well.

Yes. I mean it's a very good question. The standout area is in the hot fill space in containers in North America. I think without question, the network is maxed out. It's a segment that has grown steadily over a 5- or 6-year period at about 3% a year, but obviously has had a much better run over the last several quarters. So, without question, that part of our footprint is capacity-constrained at the moment. Now that won't last forever. Obviously, we'll put the capacity in place if necessary to capitalize on that growth. That's the one that stands out. The supply-demand balance is manageable. As we consider the comparisons for this year, including today's results, there is little variation from COVID on a period-to-period basis. This perspective will also apply as we look ahead. Our fourth quarter will conclude at the end of this fiscal year and we expect to see growth in the low single digits, which is typical for any given year. While it may not be the most exciting response, it reflects the reality of the diversified portfolio we manage. In summary, Amcor has delivered strong year-to-date earnings growth, with EPS up 16% on a comparable constant currency basis. We've continued to build momentum, and overall demand for our products has remained healthy. Thank you, operator, and thanks, everyone, for joining the call today, for your interest in Amcor and for your questions. We'll close the call now. Thanks very much.