Amcor Plc (AMCR) — Q2 2025 Earnings Call Transcript

Thank you, Kate, and thank you, everyone, for joining Amcor's fiscal '25 second quarter earnings call. Joining today is Peter Konieczny, 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 and third slides in today's presentation list several factors that could cause future results to be different than current estimates. Reference can be made to Amcor's SEC filings, including our statements on Form 10-K and 10-Q for further details. With that, over to you, PK.

Thank you, Tracey, and thank you to everyone for joining us on today's call. Amcor had a very busy second quarter, and we are making good progress on three main priorities: first, delivering on the base business; second, completing the necessary work to close the announced merger with Berry Global; and third, ensuring we are well-prepared for a prompt start and integration. Regarding the base business, we always begin with safety. I am extremely proud of the commitment our teams show to safety every day. The safety and well-being of our people will always be our top priority, and we continually seek ways to improve. In fiscal '25 so far, we have continued to achieve outstanding results. We recorded an industry-leading total recordable incident rate of 0.30, and 79% of our sites remained injury-free for over a year. Our key messages for today are outlined clearly. Q2 results met the expectations we set in October, as we continued to execute and deliver across key financial metrics. We are pleased to report our fourth consecutive quarter of sequential volume improvement and a return to sales growth, even if only slight. Margins also continued to improve, contributing to a 5% increase in both adjusted EBIT and EPS on a comparable basis. This solid performance and our confidence in the second half put us on track to meet our full-year guidance, which we are reaffirming today. Additionally, as we continue to perform well in our core business, we are highly focused on the unique opportunity to accelerate growth and enhance earnings and cash generation through our previously announced merger with Berry. On the topic of our strategy, I shared in October my plan for Amcor to deliver consistent, sustainable organic growth in the low to mid-single digit range, emphasizing our commitment to customers, sustainability, and optimizing our portfolio. I also outlined my vision for Amcor to become the global packaging partner of choice. The merger with Berry aligns perfectly with this strategy and brings us closer to achieving our vision. The rationale behind this combination is compelling. One of the most significant long-term benefits is the potential to drive stronger and more consistent organic growth and to further improve margins. We have identified several growth opportunities, with two of the most significant highlighted. First, the combined company will provide a wider primary packaging portfolio across consumer goods and healthcare sectors. In the context of a stronger, larger enterprise, Amcor will be better positioned to refine our portfolio mix to focus on higher value, faster-growing markets. This process has already begun with Berry's recent divestitures, which have improved their product mix and reduced cyclicality. By further refining our portfolio, we will enhance growth rates, margins, and cash generation. Second, this merger creates exceptional capabilities in material science and innovation. We plan to drive growth through innovation and more sustainable packaging solutions by efficiently leveraging our combined resources. With over 1,500 R&D professionals and an annual R&D investment of $180 million, we will better optimize our R&D spend and focus on addressing complex functionality and sustainability challenges. The anticipated growth and significant synergies will yield considerable value for all shareholders in both the near and long term. As for the steps taken towards closing the merger, we are making swift progress. In January '23, we filed the definitive joint proxy statement with the SEC, with shareholder meetings scheduled for February '25. We have submitted necessary materials for regulatory approvals in nearly all jurisdictions, and the first approvals have been received. The composition of the Board of Directors is finalized, and we are well on our way to completion. Regarding integration preparedness, we are well-positioned, focused on building our teams and filling key roles to ensure a rapid start after the close, with well-defined plans for the initial 100 days based on our proven integration strategy. We have a robust track record of successfully executing large transactions, and our teams have extensive experience in integrating sizable businesses. To summarize our financial results, delivering on the base business remains a priority, and we continue to perform well, with second quarter results aligning with the expectations set in October. Our unique value proposition resonates with customers, which has helped us return to overall sales growth in Q2, with net sales of $3.2 billion slightly exceeding last year. Overall volumes increased by 2.3%, bouncing back from the first quarter and offsetting a negative impact from price mix. This marks our fourth consecutive quarter of sequential volume growth. While destocking continued in healthcare and demand was soft in the North American beverage sector, which negatively impacted overall volumes, the rest of the business showed consistent growth, particularly with the first quarter seeing an increase of about 4%. The improvement in volume trends, combined with proactive cost and productivity actions, helped us offset the adverse effects of price mix, resulting in solid earnings growth. Adjusted EBIT rose by 5% year-over-year, and adjusted EBIT margin expanded by 40 basis points. Adjusted earnings per share of $16.1 also increased by 5% on a comparable basis, and cash generation was higher than the previous year, allowing us to reaffirm our fiscal-year guidance. I will now hand the call over to Michael for a more detailed review of the results and outlook.

Thanks, PK, and hello, everyone. Beginning with the Flexibles segment on Slide 11 and focusing on our fiscal Q2 performance, Q2 volumes were up 3% compared with last year, reflecting ongoing solid growth across all key geographies and a number of important end markets. Net sales also returned to growth, increasing by 1% on a comparable constant currency basis and higher volumes more than offset unfavorable price mix of approximately 2%, primarily related to lower healthcare volumes. As expected and discussed in prior earnings calls, we continued to see destocking in the healthcare in North America and Europe pharmaceuticals, which resulted in a headwind of approximately 1% to overall segment volumes. Compared to the fiscal first quarter, destocking abated and the related price mix headwind improved. And exiting the second quarter, we believe healthcare destocking is now largely behind us. Across the balance of our Flexibles portfolio, volumes were up 4%, reflecting solid demand across regions and in many product categories. In North America and Europe, second quarter demand remained solid, with volumes increasing mid-single digits in both regions, despite the negative impact of healthcare destocking. Topline growth was strong across the Asian region, reflecting price/mix benefits and mid-single digit volume growth, supported by strong demand in China and across Southeast Asia. In Latin America, volumes were broadly in line with last year's second quarter, with good growth in Colombia and Peru offset by demand in Argentina. From a product category standpoint, ready meals and premium coffee showed strong growth and dairy, meat, liquids and pet care were up low to mid-single digits. In healthcare, medical returned to growth. However, pharma volumes continued to be down low double digits compared with last year as a result of destocking, which as I mentioned earlier, is now largely behind us. Good earnings leverage continued, and adjusted EBIT for the quarter of $322 million grew by 4% on a comparable constant currency basis. Higher volumes combined with strong cost performance and the benefits from restructuring led to another quarter of margin expansion, with adjusted EBIT margins up 20 basis points to 12.8%. Turning to Rigid Packaging on Slide 12, the Rigid business continues to advance its performance and the trajectory of overall segment volumes improved for the fourth consecutive quarter. Net sales were approximately 1% lower than last year, reflecting an unfavorable impact from price mix of approximately 2%, partly offset by a return to volume growth, with overall volumes up approximately 1%. As expected, customer and consumer demand in the North American beverage business remained soft and variable through the quarter. While beverage volumes were down mid-single digits, this marks an improvement on the first quarter of approximately four percentage points. Latin America volumes were down single digits versus last year, reflecting weaker customer demand in Argentina and Colombia, which was partly offset by growth in other countries, including Brazil. The Specialty Containers business delivered strong growth in spirits, wine and beer, with volumes down in healthcare due to destocking and volumes in our closures business were higher than last year. From an earnings perspective, the business executed well in another quarter of growth and margin expansion, reflecting benefits from an ongoing focus on cost and productivity measures. Adjusted EBIT of $53 million was up 10% on a comparable constant currency basis, with EBIT margin increasing by 70 basis points to 7.3%. Finally, in late December, we completed the sale of our 50% interest in Bericap North America closures business, which we announced back in October. Proceeds of $122 million were used to reduce debt, demonstrating our commitment to disciplined capital allocation, which takes us to the cash flow on the balance sheet on Slide 13. On a year-to-date basis, the business generated a net cash outflow of $38 million, which includes an inflow of more than $350 million in cash flow in the second quarter, approximately $80 million better than last year's second quarter, largely on the back of improvements in working capital. Stronger quarterly cash flow and receipt of proceeds from the Bericap sale led to a reduction in net debt of approximately $375 million compared with last quarter. Leverage also improved sequentially coming in at 3.3 times, which is in line with the expectations we provided on our October call. We expect leverage to further reduce through the second half of the fiscal year, and we remain confident in meeting our expectation to exit fiscal 2025 with leverage at three times or lower. Through the first six months of fiscal 2025, we returned approximately $365 million in cash to shareholders through our quarterly dividend. This brings me to the outlook on Slide 14. And as PK mentioned earlier, based on our solid first-half performance and our confidence in the second half, we remain on track to deliver for the full year and we are again reaffirming our guidance. For fiscal '25, we continue to expect adjusted earnings 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%. We continue to expect to deliver strong growth in the underlying business for the year, as earnings momentum continues to build. And as we've pointed out previously, it's important to remember that the guidance assumes an EPS headwind of up to 4% related to more normalized levels of incentive compensation based on our expectations for improved annual financial results. Excluding this incentive normalization, we expect growth from the underlying business in the mid-single to low double-digit range. We continue to assume overall volumes will increase in the low to mid-single digit range for the year, with trading performance through January in line with this expectation. We have updated our interest guidance to between $290 million and $300 million, bringing the midpoint modestly lower to reflect the benefit in the second half related to the Bericap proceeds being used to reduce debt. And as a reminder, the overall impact of the Bericap sale on EPS for the year is relatively neutral, taking into account the loss of annualized EBIT of approximately $19 million and the benefit of lower interest. Our effective tax rate range remains unchanged at 19% to 20%. In terms of phasing through fiscal '25, we expect this will be aligned with historical average, with the second half generating 55% to 58% of EPS based on our guidance range and the fourth quarter being the strongest of the year and typically 30% or more of full-year EPS. And finally, we're affirming our expectations to generate strong adjusted free cash flow in the range of $900 million to $1 billion for the year, supporting our confidence in exiting the year with leverage back at three times or lower, as I noted earlier. We are pleased with our continued execution across the underlying business, and we are confident in our outlook for the year. And we're excited about the additional opportunities we have to accelerate future growth through our combination with Berry. So with that, I'll hand it back to PK.

Thanks, Michael. A few closing remarks to summarize ahead of taking questions. We're executing well on the underlying business and are confident our merger with Berry is a winning combination for all stakeholders. The path to completion is clear, with meaningful milestones already behind us. We remain highly focused on next steps to ensure we are setting the organization up for success, and we remain on track and confident the transaction will close around the middle of calendar year 2025. Kate, we're ready to take questions.

Good morning.

Good morning.

Hi, you talked about potential divestitures to strengthen the business. And I'm just wondering, do you expect that those could be impactful at all to synergy targets or timeline? And then, you know, as the divestiture opportunity, do you think it's larger than maybe you had expected, you know, late last year when you announced the deal or if there's any kind of color you can give us in terms of whether these are more likely Berry assets, Amcor assets or just any additional color you can give?

Yes. Thanks, Anthony. Look, I think you're talking about the portfolio pruning activities that I mentioned on a couple of calls earlier and also in the context of the Berry combination. For us, this is one of the additional levers that we can pull in order to orient the business towards a stronger, faster growing business organically and a business that is more attractive in terms of higher and better margin quality. Now, with the combination with Berry, we have embarked on a work stream that essentially puts the whole portfolio on the table. We have started the conversations around that. So, we're on it and we're pretty much looking at everything. And as I've said before, the criteria are multiple criteria that we would apply to this analysis, but two of them are stronger intrinsic organic growth and margin quality would be the two outstanding. It's a little early for us to say, you know, where we land and what we're going to do. I think we need a little more time in order to come to a conclusion on it. But, you know, that is the key consideration here. I'm not sure it will have an impact on accelerating synergies, and that's where you were coming from. I think it's really just about organic growth and making the business more attractive in terms of margin quality.

Hi, PK and Michael, thanks for taking my question. So, I just want to go back to a point around underlying demand. I think in the last quarter, there's been much discussion or even over the last year about volume growth returning as destocking ends. So, it certainly seems as though that has happened. But in the last quarter, you talked about underlying consumer demand still being fairly tepid and seemingly in the second quarter, that hasn't changed too much. So, I'm just wondering if you can update our views in that respect, whether there has been any restocking in the period. And to what extent do you believe price mix will improve in the Flexibles division in the third quarter and fourth quarter? Is that going to be a positive outcome as that destocking in healthcare has ended? Thank you.

Yes, Keith, there are a couple of questions there. Let me try to address them. So, first of all, when we look at our volume expectations, and the second quarter of this fiscal year wasn't an exception, we did not really expect consumer demand to strengthen a lot. We always talk about consumer demand sort of in the range of being flat to slightly down. And that is essentially what we've seen. Now, when we look at scanner data and we look at other reporting from customers, we triangulate all that, I think we get to the conclusion that the consumer has modestly softened in the second quarter versus the first one. And that's just the way it is and we've seen that too. On the other hand, you know, when I take a step back and look at our volume performance, I think it's important to calibrate against that environment. And we're actually pretty happy with the volume performance in the second quarter. Let me just highlight a few things here. We are up in the second quarter versus the first quarter and sequentially, we've almost seen a point of growth between Q1 and Q2. Flexibles is up 3%. Rigids is up overall 1%. When you look at the overall business, it was the fourth consecutive quarter of volume improvements or the third consecutive quarter of volume growth that we've seen. And then also, to your question on price mix or particularly on mix, you know, we are sitting in a spot where we believe that the healthcare destocking is pretty much behind us at this point. We've seen some abating destocking in the pharma subcategory in the last quarter in Q2. Maybe there is a bit of lingering destocking that carries over into Q3, but for all intents and purposes, I believe that we can talk about calendar '25 as a year which is going to be cleaner from a destocking perspective. And then, the final point that I want to make is, you know, as healthcare is improving, we are going to see an improved mix exposure in the back half. We're also pretty confident that healthcare will overall return back to growth. So, that's on your mix question. And then coming back to the final point that I was going to make on the point of restocking, we never really felt that restocking would be a trend in the industry. What we've seen in the past was our customers across the different categories have built inventory in response to the supply chain shocks that we've seen in the past. After the supply chains sort of stabilized, there was an overall trend to fixing the inventory levels maybe even further, you know, because of the higher interest costs and the carrying value of inventory. That's driven it down to a new normal. What we see from here on are just seasonal inventory impacts, but nothing that relates back to a structured destocking initiative.

Thanks so much. Hi, everyone. Good morning and good afternoon. A question on the momentum within Flexible Packaging. Can you talk to the degree to which incentives and/or FX might have impacted what otherwise would have been the EBIT conversion in Flexibles relative to the volume growth and whether EBIT itself in Flexibles was in line with your forecast? And as you're taking 2Q into 3Q, what kind of exit rate are you seeing on volume and conversion within Flexibles and the categories you serve? Thank you.

I can address the latter part of your question regarding volumes. From a volume perspective, we anticipate that the first half will remain within our guidance range of low to mid-single digits. Overall, this aligns perfectly with our expectations. As we move from the second quarter into the latter half of the year, I have no reason to expect any changes in this trend. Therefore, we are reaffirming our volume guidance of low to mid-single digits for the full year across all categories, including Flexibles and Rigids.

Yes. If we discuss the profit performance of the business, we were pleased with the quarter's results, which met our expectations. We are still experiencing some negative mix, particularly in healthcare, but that should improve. From a cost perspective, the business continues to focus on maintaining margin quality while also working on cost reduction. Last year, we had a significant focus on cost reduction, especially as we began to manage the impacts of destocking earlier in the quarter. This year, we are still concentrating on costs, but we are facing a tougher comparison. Consequently, we have brought some labor back into the business to ensure we can meet demand without any issues. Overall, we are satisfied with where the business landed. There hasn't been any material impact from foreign exchange or incentives to mention.

Good morning, everyone. So I understand that an integration planning event was recently held where both Amcor and Berry's staff joined to form global work streams. Can you just shed some color on the event? I'm interested in whether the leadership team managed to walk away with greater confidence and perhaps greater granularity on the target synergies. Any comments that you can share, particularly on the key line items of procurement, G&A, and operational would be helpful. Thanks, PK.

Thank you, Daniel. First of all, everything you mentioned is accurate. We are focusing on preparing for integration and expanding our initiatives with a wider group of colleagues from both companies to ensure we hit the ground running once the acquisition is finalized. Currently, we are organizing ourselves; it's still business as usual as we operate as two separate entities. We cannot begin the integration yet, but we can plan for it. Following our playbook at Amcor, and considering Berry's extensive experience in business integration, we are establishing an integration management office. Within that framework, we are creating teams to tackle various work streams that will help merge our cultures and generate synergies as the two companies come together. As we review our previous estimates, we are gaining more confidence in our synergy target of $650 million, primarily related to costs. This breaks down into procurement, SG&A, and operations. Overall, we are increasingly confident in the numbers we have shared, particularly in procurement, which represents the largest single item at $325 million. To put this into perspective, the combined companies have a spend of about $13 billion, with around $10 billion attributed to raw materials. When we assess the procurement opportunities against this spend, we estimate a synergy capture of about 3%, which we believe is well aligned. Therefore, we feel very confident about the synergies at this time.

Hi, good morning and afternoon, everyone. Thanks for taking my question. This is actually Matt Krueger sitting in for. You know, just wanted to follow up on the raw materials front. Can you provide some added details and an update around what you're seeing in the raw material and other input cost basket across your business, maybe give us an updated outlook for the year? And, you know, any thoughts on if or how this latest round of tariffs impacts your cost base or maybe even how you're going to conduct your business. Any details there would be great. Thanks.

Sure, I can assist with that. It's Michael here. From a raw material perspective, the first half of the year was quite stable. Looking at our revenue figures, the raw material costs in the first half remained unchanged, indicating that overall input costs were steady. The second quarter followed a similar pattern to the first, with only a slight pass-through of less than 1% in revenue and no impact on earnings. It's important to note that we have a diverse range of products across different regions, which can experience varying price movements. Overall, the cost basket was relatively flat, possibly slightly down. This includes declines in resins and liquids in the low single digits, while materials like aluminum saw mid-single-digit increases. Looking ahead to the third quarter, which is as far as we can confidently project, we anticipate a similar situation. Asia and Europe appear stable, while North America may see slight price increases, but we expect the overall environment to remain accommodating. Concerning tariffs, our business is highly regional, and in North America, the volume of imported goods is minimal, typically limited to specialized products unavailable locally. Consequently, tariff influences on our costs will be considered in pricing, but we do not foresee significant impacts on our operations due to the regional nature of our business.

And I may add to that. On the tariff side, you know, first of all, everything that Michael said is very true. We're a very regional business. If anything, we've become more regional given the experience from the past. Prolonged supply chains have essentially created risk on the service levels to your customers. So, we have even tried to shorten supply chains over the past. And in terms of the ability to pass through tariffs, when you think about it, you know, in some cases, we even have agreements with customers that would be based on indices that would allow us to pass on these additional costs. So, I think we're in a spot where because we're regional, because we have some pass-through opportunities, we feel we are not immune, but somewhat robust against the tariffs.

Hi, Peter. Hi, Michael. I just wanted to ask just about the trajectory in the Health business. So, obviously, some improvement there. It sounds like it's pharma that's still dragging on volumes. Just wondering, as we move through the balance of the year, should the Berry merger complete, what's the exposure like to healthcare overall post-merger? And do you think that the momentum that you're seeing gives you further confidence that you can drive that organic sales growth in the combined entity as you plan to, please?

Thank you for that question; I'm a strong supporter of healthcare. I can provide some insight into how we view this sector. Firstly, I believe that healthcare is a valuable part of our portfolio. We are particularly enthusiastic about our merger with Berry, as it allows us to enhance this business. Together, we foresee a combined healthcare business worth approximately $3 billion, with appealing characteristics that complement each other well. On Berry's side, they offer products like multi-component delivery devices, including inhalers, which we currently lack in our portfolio. While healthcare has faced challenges recently due to significant destocking, we anticipate that this trend will conclude by the beginning of calendar year 2024. Healthcare was the last category affected, as its destocking started later and lasted longer. In the first quarter of this fiscal year, we observed some destocking, but the medical segment has already begun to rebound slightly, whereas pharma continued to struggle. In the second quarter, medical showed further improvement, and we noted a slowdown in destocking for pharma. Going forward, we believe the destocking phase in healthcare is essentially finished, although some residual effects may carry into the third quarter. I mentioned this earlier, but fundamentally, I feel confident that destocking is over. As a result, healthcare should return to growth, and we can expect to achieve our historical growth rates of 3% to 4% over time. This will help improve our bottom line, and we are optimistic about our path ahead.

Thank you, PK, Michael, Tracey, Damon for taking my questions. You know, as you're proceeding through the due diligence process with Berry, is there anything that stands out that you weren't expecting, upside, downside? My sense is that, you know, obviously some of the synergies do have some upside, given your comments, PK earlier. And then, secondly, just, you know, given that overall volume growth is slowly improving in the base Amcor business, is there anything you're doing maybe from a cost vantage point to help drive better profitability? Thanks.

Yes, Mike. So, I've just got to think about the first question. There were two questions here. Can you guys help me, what was the first one?

Anything that stands out in the due diligence...

Thank you. I would say there are no surprises on our end as we transitioned from announcing the deal a couple of months ago to where we are today. It's important to note that it’s business as usual at this time. The data available for us to review has largely remained the same, and any significant changes will occur as we approach closing, which we expect to happen in the middle of this calendar year, consistent with our previous timeline. In response to your first question about any positive or negative developments, everything is pretty much as we expected. Regarding synergy, we are becoming more confident in those aspects, which is a positive sign. Now, for the second part of your question, Michael, would you like to address that?

Yes, I can take that one, PK, sure. No, thanks for that part of the question, Mike. Yes, look, on the cost side, we continue to focus on, you know, driving efficiency in our operations and our plants, managing the labor pool, you know, and flexing that to the volume as needed. We continue to look at, you know, the shift patterns and managing over time. And we've also still got some residual benefits to come through from the restructuring programs that we had in place as we called out a couple of years ago in relation to offsetting some of those disposed earnings from Russia. So, you know, in the first half, we've probably picked up about $7 million benefit there, and we've probably got another $7 million or so to come in the second half. So, you know, overall, you know, it's a really strong cost focus, both operationally and still some benefits to come from the restructuring. So, you know, that's all factored into our guidance that we reaffirmed for the full year.

Hi, Peter and Michael. I hope you're doing well. I want to follow up on Berry, and thank you for your insights on healthcare, Peter. What do you see as the main advantages of Berry globalizing your Rigids business? Additionally, could you address the growth outlook for closures and dispensing systems and the potential impact of that? Thank you.

Thanks, John. So, on the Rigids business, you said it globalizes our Rigids business. Let me be a little more specific about that and pull that apart because I think it's really important. First of all, in terms of Quantum, our Rigids business, we summarize under the roof of rigid packaging, which is about a $3 billion business. The Berry business has a containers and closures business that is about a $7 billion business. Hence, the combination will get us to a really scaled player and multi-regions, and that's different from what we have today. Now, the key difference though is that we play only partly in the incomparable, call it, sub-segments. When I dissect our rigid packaging business, I would split it generally between the North American beverage business, which we discuss quite often because it's a scale business, it's in the beverage side. It sits in North America and it serves categories like isotonics, ready-to-drink tea, where we have some underlying challenges right now because it's a more discretionary category, as we've discussed many times. That's a scale, volume-driven business where we're very well positioned in North America on the Amcor side. The other part of that business is around specialty containers. That's a different business. It's also a scale business, but not as big as the North American beverage business, which serves a number of different categories and makes containers for those categories across the board. Now, the Berry side of the containers business is much more comparable to the specialty containers business of Amcor. That's where the complementarity comes in. In fact, Berry doesn't do anything in the North American beverage business. They don't have exposure to that type of a segment. So, we believe that is very positive for us because we are very interested in scaling up the specialty containers business, as we call it, which is very much aligned with the Berry business. And again, on the Berry side, we have really good high-value products. When you think about it, it is the containers business of Berry that actually brings along the healthcare exposure. And I talked about that earlier. Here, we see the multi-component, more complex delivery systems on the healthcare side, and there's other parts of the business that we likewise are attracted to. When you then go to the closure side of Berry, which is in addition to our business, particularly after we've divested our joint venture stake in the Bericap joint venture, then you will find a nice exposure to dispensing systems and pumps that we likewise are very attracted to. So, it is very complementary and it's not in the North American beverage space. And therefore, we are pretty excited about the combination. Now, you also asked us for our growth assumptions in the case of closures and dispensing systems. You know, I think it's a little too early for me to give you like a concrete answer to that, that you can hold me to as we go forward, so I'll ask for a little more time for me to go back to that and confirm that on a later call.

Thank you for taking my follow-up question. Michael, I have one for you. In your last update, you indicated a first half to second half revenue split of 45% to 55%. Based on the performance in the first half, this split suggests we are at the lower end of the guidance range. I apologize for bringing up a mathematical issue, but the midpoint indicates a greater emphasis on the second half. Given that the upper half now appears to be around 42% to 58%, how are you approaching that split for the full year based on the first half results? Thank you.

I believe, as I mentioned earlier, we are planning based on the historical averages we expect. In my previous comments about the first quarter, I indicated it could be around 45% to 55%, but that can shift slightly. Now that we are finishing the first half, our performance aligned with our expectations, with volumes in that low single-digit range. Margins have continued to expand, and we observed a 5% increase in EPS. Looking ahead to January and our projections, we're quite confident about the second half, which is why we have confirmed our guidance today. This suggests low single-digit to mid-single-digit volume growth in the second half, which will be a crucial factor for the year's overall results. The volume, particularly as we move into the busier season of the business, especially in the fourth quarter, is significant. We don't need a substantial improvement in volume to achieve strong leverage in the profit and loss statement, especially in the fourth quarter where the cost base is well established. Typically, this quarter accounts for over 30% of annual earnings. Additionally, we expect to see a better mix in the second half due to the healthcare segment returning to growth and recovery from last year's peak destocking. Therefore, we've reaffirmed our guidance, and we feel confident about it. We will provide updates in May as the year progresses.

Yes, thank you, Kate. Look, given the overall environment, we feel pretty confident and we feel pretty good about the quarter that we've delivered, and I hope that came across. And so, again, we believe it's been a good quarter. The volume growth improved. We're pretty confident in the second half, and we've reaffirmed guidance on the back of that. Thank you very much for your questions and your time. We look forward to having the opportunity to meet some of you at the upcoming conferences. Thank you very much.