Amcor Plc (AMCR) — Q4 2024 Earnings Call Transcript

Thank you, operator, and thank you, everyone, for joining Amcor's fiscal 2024 fourth quarter and full year earnings call. Joining today is Peter Konieczny, Interim Chief Executive Officer; and Michael Casamento, Chief Financial Officer. Before I hand over, let me note a few items. On our website, amcor.com, under the Investors section, you'll find today's press release and presentation, which we'll discuss on this call. Please be aware that we will also discuss non-GAAP financial measures, and related reconciliations can be found in that press release and the presentation. Remarks will also include forward-looking statements that are based on management's current views and assumptions. The second slide in today's presentation lists several factors that could cause future results to differ from current estimates. Reference can be made to Amcor's 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 then rejoin the queue if you have any additional follow-ups. With that, over to you, PK.

Thank you, Tracey, and thank you to all who have joined us for today's call. I want to open the call with a big thank you to our Amcor colleagues around the world, all of whom demonstrated tremendous focus in fiscal '24. Their hard work and dedication enabled us to improve our financial performance through the year and to finish the year strong. And I want to publicly recognize their efforts. In terms of Q4, we start as always with safety on slide three. Safety is our number one priority, and our efforts to provide a safe and healthy work environment for our teams resulted in another year of improved performance, which reinforces our industry leadership when it comes to safety. 73% of our sites have remained injury-free for 12 months or longer, and overall, Amcor experienced a 12% reduction in injuries compared to fiscal '23. Our commitment to our people and their safety remains our most important value, and we continue to aspire to achieve our ultimate goal of zero injuries. Turning to slide four. Amcor's near-term priorities remain consistent with those I shared on our Q3 earnings call, and I'm happy to report we are successfully delivering against these priorities. As I just mentioned, providing a safe and healthy work environment for our global workforce will always be number one. Second, is to stay close to our key stakeholders, including employees and customers, which helped us finish the fiscal '24 year strongly. Our teams continued to execute well in the fourth quarter, maintaining cost discipline as volume trends continued to improve sequentially with a return to volume growth in Q4. As a result, we delivered another quarter of solid margin expansion and earnings per share growth above the expectations we set out in April. Third, is to build on the progress we have worked hard to deliver across the business and ensure we maintain momentum in fiscal '25. We expect our earnings and volume performance to continue to improve, and this is reflected in our fiscal '25 guidance. And fourth, I and our senior leaders continue to focus on providing stability for the business and helping our teams deliver for all our stakeholders. We're executing well and winning with our customers as we continue to reinforce the Amcor strategy; our agenda and priorities have not changed. Moving to our key messages for today on slide five. First, Amcor reported strong financial results for the fourth quarter, driven by solid performance in the underlying business and a return to volume growth, resulting in both segments delivering adjusted EBIT growth on a comparable basis. Second, volumes, EPS growth, and free cash flow were ahead of expectations we set out in April. Overall volumes increased 1% in the quarter compared to last year, which exceeded the low single-digit decline we were anticipating. Earnings per share also outperformed expectations, up 9%, which was above our guidance for mid-single-digit growth. Third, we expect to build further momentum and deliver annual EPS growth through continued strong performance from the underlying business. At the midpoint of our fiscal '25 EPS guidance range of growth of 3% to 8%, we expect total annual value generated to once again be consistent with the 10% to 15% outlined on our shareholder value-creation model, assuming a dividend yield aligned with historical averages. It is important to point out that we expect the underlying business to continue to deliver strong growth in line with the high-single-digit earnings growth experienced in Q4, considering our guidance includes an EPS headwind of approximately 4 percentage points related to normalization of incentives. Michael will step through the components embedded in our guidance range in more detail broadly. Our final key message is that our capital allocation priorities and strategies for long-term growth have not changed. We continue to invest in organic growth across the business, including in higher-value priority categories in emerging markets. Strategic M&A also remains an important source of incremental growth and value creation. We believe the strength of our market positions, our opportunities to invest for growth, our execution capabilities, and our commitment to a compelling and growing dividend, and to maintaining an investment-grade credit rating sum up to a convincing investment case for Amcor. Moving to slide six for a summary of our financial results. We finished fiscal '24 on a strong note as customer demand continued to improve off second-quarter lows, and our teams did an excellent job leveraging our differentiated value proposition to support our customers and drive volumes higher. At the same time, our unwavering focus on proactive cost management through the year resulted in four consecutive quarters of strong margin expansion. Overall volumes returned to growth earlier than we anticipated and were up 1% in Q4, our second consecutive quarter of strong sequential volume improvement. As expected, volumes across healthcare categories and in the North America beverage business remained soft through the fourth quarter. Combined, these two businesses, which represent approximately 25% of sales in Q4, unfavorably impacted overall volumes by approximately 2%. Across the balance of the business, overall volumes were approximately 3% higher than the June quarter last year. This reflects broad-based improvements in customer demand across many end markets and what we believe is the end of destocking in all categories, other than healthcare. Price mix had an unfavorable impact on sales of approximately 3%, primarily driven by continued destocking in high-margin healthcare categories. Cost reduction and productivity initiatives remained a focus, and we delivered another quarter of significant cost savings totaling more than $110 million, including an additional $20 million of benefits from structural cost initiatives in Q4. This builds on the outstanding efforts by all our teams across the business through the first three quarters, bringing the total cost savings for the year to more than $40 million, including structural savings of $35 million. The result of improving volume trends and our focus on cost and productivity actions was another quarter of strong earnings leverage as momentum in Amcor's underlying business continued. Fourth quarter adjusted earnings per share of $0.211 grew by 9% on a comparable constant currency basis, above our April guidance for mid-single-digit growth, and adjusted EBIT was up 4% compared with last year. Overall, for fiscal '24, we delivered adjusted EPS toward the top end of our guidance range we provided last August, and our ongoing focus on cash conversion was rewarded with adjusted free cash flow of $952 million, up more than $100 million from last year and just above the top end of our guidance range. We also continued to return significant cash to shareholders through a compelling and growing dividend in addition to share repurchase, which combined totaled approximately $750 million for fiscal '24. I'll turn it over to Michael now to provide some further color on the financials and our outlook.

Thanks, PK, and hello, everyone. Beginning with the Flexibles segment on slide seven, and focusing on our fiscal Q4 performance. Q4 volumes increased by 3%, which represented a significant sequential improvement of 5 percentage points compared with the March quarter. Net sales, however, were down 1% on a comparable constant currency basis, whilst volume growth was offset by unfavorable price mix of approximately 4%, primarily related to lower healthcare sales, which we anticipated. Destocking in healthcare categories continued in North America and Europe, and this resulted in a headwind of approximately 2% on overall segment volumes. Across the balance of our Flexibles portfolio, Amcor experienced very solid growth with volumes increasing by approximately 5% in the quarter. The improved customer demand we saw in the third quarter continued as customers increased their focus on growing volumes and returned to more normalized order patterns now that destocking has ended. This led to broad-based growth across most geographies, with volumes increasing in several categories, including meat, cheese, home and personal care, and unconverted film and foil. Across North America and Europe, fourth quarter demand improved across many end markets, resulting in a return to overall volume growth in the low-to-mid single-digit range in both regions despite continued softness in healthcare. In North America, volumes were higher in meat, cheese, and snacks categories. And in Europe, the business delivered particularly strong volume growth in meat, home and personal care, and unconverted film and foil. Emerging market volumes were up mid-single digits in Q4. Most countries experienced solid growth with volumes in China increasing for the fourth consecutive quarter and strength continuing in India, Thailand, Brazil, and Mexico, to name a few. Adjusted EBIT for the quarter of $403 million was 5% higher than last year on a comparable constant currency basis. Higher volumes combined with strong cost performance through the quarter, including from restructuring initiatives, led to another quarter of margin expansion with EBIT margins up 110 basis points to 15%. Turning to Rigid Packaging on Slide 8. Volumes and earnings trajectory for Rigid continued to improve in the fourth quarter, with the business delivering consecutive quarters of earnings growth in the second half. As anticipated, overall volume performance for the business improved sequentially as the 5% volume decline in Q4 was 3 percentage points better than the March quarter. As expected, the Q4 decline was driven by lower volumes in the North America beverage business. Across the balance of the Rigid packaging portfolio, volumes were in line with the fourth quarter last year and favorable price mix benefits of approximately 3% resulted in a 2% decline in net sales on a comparable constant currency basis. In North America, beverage volumes were down 8%, reflecting lower consumer demand in Amcor's key end markets and unfavorable customer mix. Volumes improved by 3 percentage points on a sequential basis as destocking ended and warmer weather resulted in modest improvement in consumer consumption versus the March quarter. In Latin America, volumes increased in the low single-digit range compared with last year, driven by continued growth in Brazil and in Colombia. And from an earnings perspective, the business delivered another quarter of earnings growth and margin expansion through an ongoing focus on cost reduction and productivity measures and the realization of benefits from restructuring initiatives. Adjusted EBIT increased by 2% in Q4 with EBIT margin increasing by 70 basis points to 8.8%. Moving to cash and the balance sheet on Slide 9. Adjusted free cash flow for fiscal '24 was just above the top end of our guidance range at $952 million, up more than $100 million or 12% compared with last year. Cash generation was strong through the fourth quarter, and we delivered good cash conversion by remaining laser-focused on improving working capital performance with inventories reducing for the sixth consecutive quarter. The timing of spending on CapEx projects was also a modest tailwind in the year, which we expect to unwind in fiscal '25. Leverage of 3.1 times was down 0.3 of a turn from the March quarter and was in line with our expectations for year-end. This brings me to the outlook on Slide 10. For fiscal '25, we expect to continue building on the volume and earnings momentum we achieved through the second half of fiscal '24. Adjusted earnings are expected to be in the range of $0.72 to $0.76 per share on a reported basis, representing comparable constant currency growth of 3% to 8%. As PK noted earlier, we expect the growth in the underlying business will remain strong in fiscal '25. However, it's important to note that our guidance includes an EPS headwind of approximately 4% related to more normalized levels of incentive compensation based on our expectations for improved annual financial results. Excluding this incentive normalization, our guidance range implies expected growth from the underlying business in the high-single to low-double-digit range. Our guidance range assumes an expected volume increase in the low-to-mid single-digit range for the year, with trading performance in July aligned with this expectation. Interest expense is expected to be between $290 million and $305 million and the effective tax rate is estimated to be in the range of 19% to 20%. When combining interest and tax in absolute terms, the expectation is for a modest headwind to earnings when compared with fiscal '24. In terms of phasing, we anticipate this will be broadly aligned with historical average of approximately 45% of earnings being delivered in the first half of the year and 55% in the second half, with the fourth quarter typically the strongest of the year. And finally, we expect to continue to generate strong adjusted free cash flow in the range of $900 million to $1 billion, even as we fund an increase in capital expenditure of approximately $40 million to $60 million from a lower base in '24, which I mentioned earlier. And we expect to exit the year with leverage back within our management range of 2.5 times to 3 times. We are pleased with the finish to fiscal '24 and look forward to delivering strong financial results in '25 and beyond. So, with that, I'll hand it back to you, PK.

Thank you, Michael. In closing, on Slide 11, we finished '24 on a strong note and we are encouraged by the broad-based improvement in volumes we're seeing across most geographies and end markets. Earnings growth in both segments in the second half of fiscal '24, combined with a return to volume growth in the fourth quarter and the trends experienced in the first several weeks of fiscal '25, give us confidence that momentum will continue to build in the underlying business. We expect overall volumes to continue to grow in fiscal '25, and we will maintain a sharp focus on cost control and productivity initiatives to drive solid earnings growth. Importantly, assuming a dividend yield aligned with historical averages, at the midpoint of our EPS guidance range, we are well positioned to deliver annualized value generated in fiscal '25 to be in line with the 10% to 15% outlined in our shareholder value-creation model. We will continue to capitalize on opportunities to grow the business by staying close to our customers and providing the support and the differentiated, more sustainable packaging solutions they need to protect, preserve, and promote their products as they drive their own volume growth. We continue to invest in organic growth, including in higher-value priority categories and emerging markets. Strategic M&A is an important source for incremental growth and value creation, and we are committed to a compelling dividend that grows annually. We're confident in our execution capabilities and in the opportunities we have to continue delivering profitable growth from the underlying business and to create strong free cash flow in fiscal '25 and beyond. Operator, we are now ready to turn the line over to questions.

Thank you. Hello, everybody. Can you just give us a sense as to what you're seeing as it relates to true market conditions? I mean, obviously, you're cycling over easier comparisons from a year ago, just given inventory destocking, etc., but what is your characterization of the actual end market in the context of what we read about with consumer affordability issues and so on? I guess I'm asking because last year, your volumes were down 5% in fiscal year '24 and your guidance is, I think, it was low-to mid-single-digit volumes. So, just trying to get a sense as to what you're actually seeing in the market.

Yes. Thanks, Ghansham. Let me take that question here and then see if Michael wants to build if needed or required. Look, first of all, we've been very pleased with the performance of the volumes with a sequential improvement from Q3 to Q4, which was even better than what we expected. We went back to volume growth, which was again better than the low-single-digit decline that we had indicated after Q3. And we've been pleased with that being pretty much broad-based across the different regions and categories. So, it was a broad momentum that was building here, and we're very pleased to see that too. Then, if I double-click on where the 1% comes from, and I try to depict that into the different drivers. The first thing that I would say is that it's not necessarily consumer demand. Consumer demand continues to be muted. We would consider that to be low-single-digit down still. Also, when we go into '25 with our expectations, we wouldn't assume that that necessarily improves. What we're seeing is that our customers are starting to do better. Our customers are looking for a better balance between volumes and price. You also see that when you go through some of the announcements that have come out lately. So, that's better, and we are demonstrating an ability to win with those customers. I would just call that on a headline, the value proposition that we can bring to the customer. So, that's encouraging. That's really the driver of the improvement to a large extent. Of course, we are seeing some benefits from cycling out of the destocking that we had last year. In the fourth quarter, that would have been not really much, maybe a couple of percentage points. We are still seeing destocking in the healthcare business that pretty much goes against us. Those would be the major drivers consistent with what we're seeing when we look to '25. I hope that sort of answers the question.

Hi there, Peter and Michael. I just want to maybe reflect back on that question. What you're saying is that the consumer is still weak at the moment. So, the growth is not consumer demand, still low-single-digit down. Your volumes in FY ‘25, it feels like part of that is the unwinded destocking, which is a couple of percent that you're expecting kind of low-to mid-single-digit. So, there is maybe some slight improvement in your underlying volume. I'm just trying to work out what the difference is between those two factors. Like who do you think is losing and taking share? I'm just trying to square up the numbers from the first question. Thank you.

Yes, Keith. So, first of all, I would say it's not really a share story here. It comes down to the things that I've mentioned before, the consumer demand we would hope to improve going forward, but we're careful in terms of our expectations for the next year. We're not banking much on that to happen. If it comes, that would be great and that would provide further tailwinds for us. On a comparative basis to prior periods, you would see the destocking sort of cycling off that gets us a better volume performance in terms of what we report. In the first half of '25, we would be comping a pretty broad range of destocking versus prior periods. However, we said that pretty much came to an end after the first half last year. That won't be there in the second half anymore. In the first half, we will continue to see destocking in the healthcare category, which is pretty much a quarter longer than what we guided toward in the earnings call after Q3. But that will abate in the back half of the year. We continue to believe that our customers, to a large extent, have good exposure to big global customers, and they will continue to drive their volume performance, which is very consistent with what you're hearing. We're partnering up with them. We've built a good relationship with them over the past. We've always been very close to the big customers. As their volumes are coming back, we take advantage of that. So, you pull all that together, that results in the volume guidance of low-single-digit to mid-single-digit next year.

Yes. Thank you. Good evening, everyone. I guess maybe continuing along that line of discussion, maybe I’d like to dig in a little more on the healthcare end market, which is still your most challenged. If I was doing the algebra right, it seems like you're implying that was down near high-single-digit volumes in the fiscal fourth quarter. Sounds like destocking is continuing for at least one more quarter. You talked about the confidence that you have of that ending by the end of this calendar year, and maybe a little bit more clarity on what the assumptions are for the healthcare business for volumes in fiscal '25, which has significant implications on mix as we move through the year. Thank you.

Yes, good question, Adam. First of all, I'd say that healthcare is, as far as I'm concerned, a real gem in our portfolio. Let's start right there. If we're challenged with the healthcare category, it would really just be on the back of the normalization that the category is seeing after a major dislocation that the category has gone through in the more recent past. This dislocation is now coming to an end with the category essentially rightsizing their inventories. That's what we're seeing. So, we don't have any concerns overall in the stability and attractiveness of this category. What we're going through until the end of the calendar on the back of what we know right now is continued destocking. I can confirm that the high-level estimates you're doing on volumes are correct in terms of high-single-digits being down in the recent past. I think the destocking that we've seen in Q4 is probably slightly better than in Q3. On everything that we know, the destocking will come to an end by the end of the calendar. That would be based on various conversations we have with our customers and what they're confirming currently is happening in their business. In the back half, when the destocking has come to an end, we're expecting a better volume performance with the business as you would imagine. We would definitely have no concerns to believe that healthcare can return to growth rates in line with the historical averages of mid-single digits growth. The destocking that we're seeing in healthcare is quite similar to some other categories we've seen beforehand, except healthcare started later, in Q2 last year, primarily on the medical side. We've cycled through that now and are seeing some impacts on the pharma side, which we're now processing through. That will end by the end of the calendar, as I said before.

And maybe Adam, just to pick up on the mix point. Yes, you're quite right. Obviously, the mix is unfavorable in Q4. With the destocking continuing, if we think about our guidance assumptions for FY '25, we would expect that negative mix to continue in the first half. As we head into the second half, it will obviously improve as we're through the destocking. So, on a full-year basis, we probably expect the mix to be more neutral.

Good morning, everyone. Just a quick question on capital management. I noticed that the Board has chosen to refrain from share buyback at this point. Can you talk us through the decision there? Is it a reflection of wanting to see leverage ratios lower or is it a reflection of more confidence in the M&A pipeline?

Yes. Thanks, Dan. It's Michael here. I can take that one for you. Look, we’ve still got a little bit more to go of a buyback that was approved earlier on. We didn’t do that in Q4. That’s really a function of having a good M&A pipeline and opportunities there as always. So, we elected not to do the buyback. From a capital allocation standpoint, the buyback is just one element of that. Clearly, the strong cash flow, we direct the CapEx first to grow the business organically. We continue to pay a dividend, and you saw us increase the dividend again. With the free cash flow left over, clearly, we'd like to invest that first and foremost in M&A because that's where we get the greatest return. If that's not available, then the buyback is really the next alternative. The buyback is also a function of the cash flow performance as well. For now, we haven't called out a buyback for '25. We’ve still got to finish a little bit left over there to do. But we've got a good pipeline of M&A activity. We're expecting the cash flow in the business to be solid through the year as we've guided to $900 million to $1 billion. So, we'll see how things play out as we work through the year, and if there's capacity to do the buyback, we'll do it.

Good evening. We've come off two, three years of pretty sharp cost inflation that you had to absorb and pass on to your customers. Just wondering, as you look at the '25 guidance, what kind of cost inflation, raw material inflation, resin assumptions are baked into the full-year guidance? And how might it be different or not different than what you've kind of experienced over the last couple of years?

Yes, you're quite right. We've been in a highly inflationary environment. Clearly, inflation is abating, though it's still at a later level while clearly abating. From where we sit today, the main area of inflation now is really in labor, sitting in that kind of mid-single-digit range, and we'd expect that again in FY '25. Cost inflation in Q4 was about $35 million, or $190 million for this year versus $340 million in the prior year. You can see that it is abating. The main area really now is just on the labor side as we look forward. From a raw material standpoint, it's a pretty benign environment at the moment. In Q4, we've bought a broad basket of raw materials across multiple geographies globally. If I think about Q4, it was probably overall low-single-digit up, but it was a bit mixed by raw material types, so resin is up a little, aluminum up probably more mid-to-high, but then films and liquids were down. On balance, not a material impact to the business, and from an EBIT standpoint, we were pretty neutral on the raw material side. As we look into '25, we're seeing a pretty benign environment. In the first quarter, raw materials typically look pretty flat in North America and Europe. Asia might see some slight increases in raw materials, but generally, I'd say the basket of goods is pretty benign across the globe. That's what we've factored into our guidance assumptions, and we've given you a range of growth in the guidance assumptions of 3% to 8%. Obviously, raw materials are a factor within that. We pass through raw materials contractually, but there can be a lag. That's just one element that could get us to the bottom or upper end of that range.

Hi, everyone. Thanks for taking my question. Can you comment on the outlook for beverage in North America and when you expect the volumes to turn more positive? Thank you so much.

Yes, George, it's PK here. Look, beverage in North America is a little more discretionary than many of the other categories we serve. Think about the acetonics categories as such. We're seeing in the current environment, if you just look at scanner data, sort of low-single-digit to mid-single-digit decline in that category. That's what we're facing in the market right now. Our performance is also somewhat impacted by our exposure to customers that are underperforming the market. On your question, how do we expect that to continue? I think as we're looking at '25, it will largely come down to how consumer demand is developing in that category. I think we've got to be realistic here. We need to say that we're not overly ambitious in terms of expecting the volumes to turn around in the near future. We would hope that that's the case, but as we're looking into the next year, we're realistic about that. It has mostly to do with the discretionary nature of the category that we're exposed to. So, that's how I would answer the question. I hope that helps.

Morning, guys. Just heading into FY '25, can you give us a bit of a sense of the quantum of the $400 million of cost-out that you've managed to do over FY '24 that will have to come back into the business as volumes pick up?

Yes, sure, James. It's Michael here. I can take that one. As you said, we've been focused on cost in '24, and I'm pleased with where we ended up. We've generated savings in excess of $440 million, which includes $35 million of benefits from the structural program we've put in place. Where that's coming from, there's two elements: the operating performance of the business; we've been laser-focused on managing shift patterns, taking out whole shifts where we can, and flexing the operational costs of the business to the lower volumes. Procurement has been a big driver in this environment. We've worked hard through our global reach and scale. Discretionary spend has been managed tightly. We've had a strong year in '24, and we'll be lapping some of that. But as we look into '25, the structural benefits of $35 million will have a further $15 million in '25. We’re well down the path of that, and we're confident in that space. We will continue to get procurement benefits and manage operations; however, as the volumes increase, we'll need to flex the labor back up to manage the higher volumes that we're anticipating. That said, it won't be linear, so, we’ll be more efficient today. We'll continue to see benefits from the cost takeout as we manage those increasing volumes.

Yes. Good evening. Just a quick one for you, Michael, please. The D&A charge in the fourth quarter was lower than expected. Do you mind just commenting on what drove that reduction in D&A in the quarter? Should we just analyze that fourth quarter D&A charge when thinking about FY '25, or are there other adjustments we need to think about?

Yes. Thanks, Brook. I can help you there. In the quarter, well, for the year, D&A was down kind of $7 million, not material. It's really a factor of a couple of things. We've reduced cap expense, so you've got a little less there. And with the restructuring we've been doing, we've closed seven plants and there have been some minor adjustments as well. As I look forward, I'd still expect depreciation to be in that kind of $400 million to $420 million range on an annual basis. As we build cap expense in '25, it will normalize some of that depreciation.

Thanks very much. PK, I've been thinking a little bit about the business kind of beyond the volume normalization process and in the nearer term, the benefits, your profitability is getting from the restructuring program that you've put in place. Are there areas you think might be a drag on growth that the business could ultimately produce?

Yes, hi, Richard. I wonder how I can best answer that question about refreshing certain areas of the portfolio and seeing potential drags on the performance of the business going forward. First, I've got to remind everyone of my position as interim; it's hard for me to formulate views on the long-term strategy of the company, which touches on the portfolio. However, I believe that the business should continue to focus on categories that are more attractive than others. That would be a starting point—focusing the business on certain areas that have stronger margins and growth than others. In Flexibles, the challenge is that you can be everything to everybody, which has never played out well. Examples of attractive categories include protein, in meat and dairy; premium coffee; healthcare; and pet food. As for geographies, I like the business's exposure between developed and emerging markets. We want to continue the journey we've begun, seen in our acquisitions in the past. That's how we're thinking about it, and we hope that provides insight.

Good day, Peter and Michael. Just a question regarding the flow of volumes through the quarter. Where did the exit rate end at? Can you make any comment on developed versus emerging markets within that?

Yes, I'm happy to take that question. I'm not a big believer in commenting on monthly volume performances because you have big swings in there that are not always indicative. A quarter is better for actual performance. A 1% overall growth in Q4 indicates the momentum we carry into fiscal '25. Regarding developed versus emerging markets, we've seen growth in emerging markets as you'd expect. Developed markets were more muted but showed growth in Q4, in part due to lower healthcare exposure. That's encouraging, so emerging markets growing and developed markets returning to growth is the momentum we carry forward. Hope that helps.

Good morning, guys. Just going back to structural questions before, we're seeing some changes in preference shift around substrate towards aluminum cans particularly. Is that providing any headwind to the beverages segment you have and any regulatory changes in Europe that could also prove challenging moving forward?

Yes, I can answer that. These are two big questions. The beverage side substrates coexist, especially between aluminum and PET. Each has its place, with PET typically used for on-the-go consumption, while aluminum cans cater to price-driven consumers. Recently, we've seen a slight share shift to cans as consumers seek value. It's been a big trend but has not significantly impacted our volumes across the broader segment. Regarding regulatory developments in Europe, particularly the packaging and waste regulations, we welcome these initiatives aimed at reducing plastic waste in line with our sustainability targets. This move assists in advancing the industry towards circularity, which we fully support.

Hi there. Thanks for taking my follow-up. One for Michael: the restructuring costs seem to have subsided in Q4. I think there are some restructuring costs to go in FY '25. Just wondering if you can give us a sense of the drag on cash flow that will represent?

That's okay. The program was around $170 million in cash-out. We've spent net today around $110 million, leaving about $60 million to go in FY '25. You'd expect that to show in the adjusted cash flow.

Pete, I'm just curious, how much spare capacity do you have in the existing manufacturing footprint to respond to demand growth, really just in terms of managing your shift flexibility?

That's a great question, Nathan. We need to distinguish between manned capacity and machine capacity. With manned capacity, we're balancing it with actual demand profiles. From a manned capacity aspect, we're pretty much balanced. When you look at volume development over the recent past, volumes have come down, so machine capacity offers some room for additional volumes, which is encouraging for the future. However, as a business, we face challenges in flexing up and operationalizing the additional machine capacity we need. You don't always have capacity where you need it, and we must manage that on a tactical daily basis.

Well, look, thanks everybody for the interest in the Company and for joining the call. The most important thing for me is to really just go back and to the key messages for the call. We really had a strong quarter, and we've had good questions, but overall, the Company is in a good spot with the momentum developed in the fourth quarter to go into '25. We feel good about where we stand and where we sit and where our guidance is taking us for a solid year to come. Thanks for your interest in the call and talk to you soon.