Amcor Plc (AMCR) — Q4 2025 Earnings Call Transcript

Thank you, everyone, for joining Amcor's Fiscal 2025 Fourth Quarter Earnings Call. With me today are Peter Konieczny, Chief Executive Officer, and Michael Casamento, Chief Financial Officer. Before we begin, I want to highlight a few points. On our website, amcor.com, in the Investors section, you can find today's press release and presentation which we will discuss during this call. We will also talk about non-GAAP financial measures, and you can find related reconciliations in those materials. Additionally, the remarks will contain forward-looking statements based on management's current views and assumptions. The second slide of today's presentation outlines several factors that may lead to future results differing from current estimates. For more details, please refer to Amcor's SEC filings, including our statement on Form 10-K and 10-Q. Now, I'll hand it over to Peter.

Thank you, Tracey, and thank you to everyone joining us today. I would like to start by highlighting that this has been a significant milestone quarter for Amcor. We completed the acquisition of Berry Global and are now 100 days into combining two complementary businesses, transforming Amcor's ability to create value for our customers and shareholders. Our efforts are reflected in our expectation to deliver strong adjusted EPS growth of 12% to 17% in fiscal '26, with free cash flow expected to double to $1.8 billion to $1.9 billion. Significant work was done ahead of close, and integration efforts kicked off quickly on day one. Feedback from customers has been positive, and leadership teams are in place across the organization. We're executing against our synergy work plans, and we have undertaken the strategic portfolio review discussed on prior calls. In short, we are creating a stronger business that is well-positioned to deliver higher levels of consistent organic growth and long-term shareholder value. Turning to Slide 3 and safety. Similar to Amcor, safety has always been a core value for Berry. Both companies have a long history of excellent execution in providing a safe workplace, and this remains our #1 priority. For fiscal '25, Amcor's Total Recordable Incident Rate (TRIR) was 0.27, and 68% of our sites remained injury-free for the entire year. For the two months of May and June, Berry's TRIR was 0.57. Our commitment to providing and sustaining a safe working environment remains absolute. Slide 4 outlines our key messages for today, and these are aligned with our near-term priorities to deliver on the base, integrate and capture synergies, and optimize the portfolio. First, in terms of results, with two months’ contribution from Berry, Q4 shows a step-up to a high level of quarterly net sales EBITDA and EBIT for Amcor. Second, integration is progressing well. Synergy realization is tracking to plan, and we remain confident in delivering $650 million in total synergies through fiscal '28, including $260 million in fiscal '26. Third, we have now conducted a strategic review of our combined portfolio, primarily focused on defining our core portfolio. Going forward, Amcor is the global leader in consumer packaging and dispensing solutions for nutrition and health. As part of this review, we also identified businesses that are less aligned with our core portfolio. For these, we will explore alternatives to maximize value. Most importantly, our fiscal '26 guidance reflects expectations for a year of strong earnings and cash flow growth, largely driven by self-help actions. Turning to Slide 5 and our fourth quarter results, while the acquisition of Berry drives strong increases across several financial metrics, the performance of both legacy businesses fell short of our expectations for two reasons. First, and consistent with broader market data, we experienced sequentially weaker volumes for our consumers and customers in both our Flexibles and Rigid Packaging solutions segments through the quarter, particularly in North America. Overall volume performance across both legacy businesses was similar and on a combined basis was 1.7% lower than last year compared to our expectations for relatively flat. Second, in addition to lower volumes, earnings in the North American beverage business were negatively impacted by operating challenges at a few high-volume sites, which resulted in higher costs. Michael will speak more to the nature of the challenges, but let me just say here that we are comprehensively addressing the performance of this business. On that point, we have taken advantage of the Amcor and Berry combined platform to divide the legacy Amcor Rigid Packaging business into three parts. North American beverage is now being run as a separate dedicated beverage business unit with new and focused management. We're addressing the operating challenges, and we will be improving efficiency across the network. Amcor's legacy specialty containers business is now integrated with the legacy Berry business in North America, confirming an excellent product and technology fit. In Latin America, the legacy Rigid Packaging and Flexibles businesses are being combined to create scale and synergies in the region. Before turning over to Michael to cover the results, I would like to talk about the progress we've made over the last 100 days integrating the Berry and Amcor businesses and the work we have done to define our core portfolio. Beginning with Slide 6 and integration. First and foremost, we have quickly engaged with customers around the world, highlighting the many benefits and new opportunities this combination creates. Feedback has been very positive, and already, we have seen additional business wins directly linked to combining the product portfolio, operations, and capabilities of our legacy businesses. As an example, legacy Amcor is now providing membrane solutions for coffee capsules supplied by legacy Berry, thereby offering a packaging solution rather than individual packaging components. This is a great early example of the opportunities discussed when we announced the merger. From a G&A cost synergy perspective, we have moved quickly to begin eliminating duplication, lowering headcount by more than 200 to date. In terms of operations and footprints, we have been combining assets, identifying open capacity, repatriating outsourced film supplies, and transferring production volumes across the network to improve efficiency and lower cost. While still in the very early stages, we have closed one site, approved the closure of four additional sites, and we are making good progress on further footprint actions. Looking at procurement, we have combined spend data within one platform to provide full transparency, access, and real-time insight across the function globally. Our teams have worked extensively with our direct and indirect suppliers in all regions, validating the synergy pipeline and delivering quick wins, which will benefit earnings from the first quarter of fiscal '26. I'm happy with the progress we've made over the first 100 days bringing our two companies together, and feel good about how we are executing against our proven integration playbook and setting the business up to drive strong earnings growth in fiscal '26. We're confident in delivering $260 million in synergies in fiscal '26 and a total of $650 million through fiscal '28, and we are reaffirming both targets today. Slide 7 profiles Amcor's core combined portfolio. These are large, stable end markets with attractive growth and margin profiles where we have leadership positions and room to grow. Approximately 75% of sales come from advanced solutions requiring innovation, and 50% of sales are generated from focus categories, which I will return to shortly. Slide 8 shows our unique and expanded product portfolio with Flexibles and Rigid Packaging solutions to address the varied needs of our customers in these sizable end markets. This view also highlights the complementary nature of this combination, with both companies bringing different capabilities and product strength to create a stronger customer offering than either could do on a standalone basis. We already have leading positions in these categories and plenty of room to grow given the fragmented nature of these markets. Slide 9 further identifies six focus end market categories, which we have spoken about previously and collectively represent approximately $10 billion or 50% of core portfolio sales. Each has higher than average growth rates historically supported by long-term consumer trends and a requirement for complex packaging solutions. We are already winning in these attractive categories, and are now better positioned with enhanced scale, capabilities, and solutions. Turning to Slide 10. As part of the portfolio review, we have also identified several businesses with combined annual sales of approximately $2.5 billion that are less aligned with our go-forward core portfolio for one or more reasons. They may have a different growth or margin profile, that the business operates in an industry with relatively low barriers to entry, or where Amcor may not see a clear pathway to becoming a leading supplier at scale. For these businesses, we will explore alternatives to maximize value, which may include restructuring, partnership or joint venture ownership models, cash sales, or a combination thereof. These actions will enhance our focus on our core portfolio, result in higher levels of more consistent organic growth, and create value for shareholders. Our $1.5 billion North American beverage business has been placed in this group. Over the next few quarters, we will execute against the work plan I mentioned earlier to strengthen the performance of this business before exploring alternatives. We will remain disciplined as we work through these processes, and there is no definite timeline for completion. However, we do expect to make progress in some of the smaller assets in fiscal '26. Looking forward, and as you will hear from Michael when he covers our fiscal '26 guidance, Amcor is now a stronger business, and we are taking the right strategic actions to build on our foundation for creating long-term shareholder value. With that, I'll turn the call over to Michael.

Thanks, PK, and hello, everyone. Before getting into further detail of financial performance for Q4, a couple of things to note. Firstly, a reminder that the reported Q4 financial results include three months' contribution from the legacy Amcor business and two months' contribution from the legacy Berry business. Second, as PK mentioned earlier, we moved swiftly to operate as a unified organization, making decisions and managing the business on a combined basis. This included optimizing our network by reallocating volumes to better balance supply and demand. As a result, while both legacy businesses saw a similar overall volume performance in May and June, our volume commentary will primarily focus on year-over-year performance on a combined basis. Starting with the Global Flexible Packaging Solutions segment on Slide 11, which includes Amcor's large-scale Flexible Packaging business and Berry's Flexible business from the 1st of May 2025, volumes for the combined businesses were down approximately 1.5%. By region, demand in North America was weaker than anticipated, with volumes down low single digits primarily reflecting softer demand in unconverted film as well as in categories such as snacks and confectionery that can be a little more discretionary. Across all other regions, volumes were broadly in line with the prior year, with continued growth across Latin America and Asia, including in Brazil and China, offsetting modestly lower volumes in Europe. From an end market perspective, we delivered another quarter of solid growth across several focus categories. Health care, protein, including meat and dairy, and liquids delivered low to mid-single-digit volume increases, supported in part by market share gains, while pet care was strong. These gains were more than offset by softer volumes in other categories, including unconverted film, snacks and confectionery, and home & personal care, which generally fall into our niche application and nutrition value categories. Overall, net sales increased by 18% on a constant currency basis, primarily driven by the acquisition of Berry along with favorable price/mix trends. Adjusted EBIT of $450 million was up 11% on a constant currency basis, largely driven by approximately $50 million of acquired earnings, net of divestments, with the remaining variance reflecting an unfavorable price/mix, partly offset by cost benefits. EBIT margin remained solid at 14.1%. Turning to Slide 12 in the Global Rigid Packaging Solutions segment, which includes Amcor's legacy Rigid Packaging business along with Berry's larger scale consumer packaging in North America and Consumer Packaging International businesses from the 1st of May 2025. Overall net sales increased by 121% on a constant currency basis, primarily driven by the acquisition of Berry. Rigid Packaging Solutions saw similar combined volume trends to those I just mentioned for Flexibles, down approximately 2% and down 1% excluding North American beverage. As noted earlier, our performance in the quarter reflects ongoing soft consumer and customer demand primarily in the United States. Outside of the U.S., volumes in Europe were in line with the prior year and modestly higher in Latin America. By category, volumes grew low single digits in health care, and foodservice was in line with last year, offset by low single-digit volume declines within beauty and wellness and specialty categories. Volumes across a broad range of food and beverage end markets were in line with last year. Adjusted EBIT came in at $204 million, up 173% on a constant currency basis, and this was driven by approximately $150 million of acquired Berry Global earnings net of divested earnings from the December 2024 Berry kept joint venture sale, with the remaining variation largely reflecting lower North American beverage earnings. Turning to more details on North American beverage. As mentioned, volumes came in below our expectations entering the quarter. In addition, we experienced operating challenges at high-volume sites, which resulted in elevated costs through the quarter, including higher freight costs to service out-of-region supply, higher labor costs, and lower fixed cost absorption. As PK mentioned, we have developed a detailed plan to address current challenges and have already taken a number of actions. While we expect these measures will lead to better operational performance through fiscal '26, we anticipate the cost base for North America beverage will remain elevated in Q1. EBIT margin for Global Rigid Packaging Solutions was 10.9%, a new level of performance based on our acquisition of Berry. Moving to cash on the balance sheet on Slide 13. Annual adjusted free cash flow of $926 million was within the guidance range provided in April. As usual, cash generation and conversion was strongest in the fourth quarter of the year. CapEx for the year was $580 million, up from last year, driven primarily by the addition of Berry for the two months. We anticipate capital spending in the range of $850 million to $900 million in fiscal '26, with associated depreciation expected to be slightly above CapEx levels. Turning to leverage. Leverage was 3.5x exiting the quarter, taking into account combined annual earnings, and we expect leverage to fall to approximately 3.1 to 3.2x over the next 12 months. This excludes the benefit of any proceeds received from asset sales through fiscal '26, which would enable us to deliver further. Looking ahead to fiscal 2026 on Slide 14, which, for the avoidance of doubt, does not reflect the completion of any portfolio optimization actions. We anticipate a year of strong EPS and cash flow growth, and we are confident we will realize significant synergies from the Berry acquisition. We are not factoring in a meaningful rebound in consumer demand, which we believe is a prudent approach given the current macroeconomic environment and ongoing uncertainty surrounding tariffs and their potential impact on customers and end consumers. As such, we currently anticipate broadly flat volumes for FY '26. We expect adjusted earnings per share of between $0.80 to $0.83 on a reported basis, representing strong year-over-year growth between 12% and 17%. Our confidence in delivering at least 12% earnings growth in FY '26 is based on self-help in executing against our identified synergies of $260 million. In terms of phasing for the fiscal year, we expect approximately 42% to 45% of earnings will be delivered in the first half, with more weighting to the second half, particularly Q4 as our synergy run rate will build through the year. For Q1, we expect EPS to be between $0.18 and $0.20 per share, including approximately $35 million to $40 million of pre-tax synergies, which represents 8% growth compared with adjusted EPS of $0.162 per share last year. We expect earnings from the combined base businesses to be broadly in line with the prior year based on our expectation that the demand environment will remain challenged. From a cash flow standpoint, we expect free cash flow to double over fiscal '25 to be $1.8 billion to $1.9 billion in FY '26, which is after deducting approximately $220 million of cash integration and transaction costs. Net interest expense is expected to be in the range between $570 million and $600 million, and we anticipate an effective tax rate in the range of 19% to 21%. So in summary for me, we're excited about the opportunities ahead and confident in our ability to execute with discipline. So with that, I'll hand back to you, PK.

Thank you, Michael. I want to leave you with a few closing thoughts prior to opening the call for questions. We have several levers under our control that will lead to strong earnings growth over the next several years. We remain confident in our ability to deliver $260 million in synergies this fiscal year and a cumulative total of $650 million by the end of '28, reflecting the strength of our integration strategy and execution. We're taking definitive actions that will improve the financial performance of our North American beverage business. Through portfolio optimization, we are focusing the business on attractive nutrition and health markets, each of which contributes to creating a stronger business and long-term shareholder value. Operator, we're ready for questions.

On the potential beverage strategic considerations, now that has been officially announced, while the timing is uncertain, how could that impact the procurement synergies given that complementary resin buying was a portion of the buying power there? And in the event there is an action taken, should we think of procurement savings as a similar dollar amount over the three years or maybe as a percent of revenue? Any considerations would be helpful there.

Well, thanks, Matthew. I think the potential divestment of the North American beverage business will not have a material impact on our ability to generate the procurement savings. We've spoken on several calls before that both legacy businesses have been strong buyers of different resin categories. Berry actually buys little PET material, whereas this is the major material for the North American beverage business. We should also keep in mind that some of the resin that we convert in the North American beverage business is actually sourced externally. So on the back of that, we believe that the procurement savings that we're estimating, which are making up about 50% of the committed synergies, are not materially impacted. So we're still expecting about $650 million in dollar terms.

PK, my question is on top line trends. Can you talk a bit about why, from what your customers are saying, you're still seeing such weakness in what should be stable to growing markets, especially markets that you think you're now gaining share in? So why are we not seeing better volume trends there? And for that matter, volume trends out of you, given that you're gaining share? And the related question, way back when Amcor was one of the, I think, first companies that did value-based pricing across its portfolio to good effect. What opportunities do you see here about implementing the same thing across the Berry platform?

Thanks, George. Two questions there. Let me just make a quick note here so that I don't forget. So first off, on the volume performance, maybe that gives me an opportunity to step back and shed a little more light and summarize the key messages again. Fourth quarter came in a little softer than what we expected and also sequentially softer. That was essentially the miss against our expectations. We had expected the same volume performance in Q4 that we saw in Q3. When you took a look at the major underlying trends, it's really the weakness in North America that drove it. When we look outside of North America, we saw volume performance, which was broadly flat versus the prior year. We saw some growth in the emerging markets between LatAm and Asia Pacific that were offset by just a tad of a weakness in Europe. North America was the major source of weakness here. Both businesses have seen similar trends. Exposure was pretty much the same in North America to a weaker environment, driven by overall consumer sentiment in a macroeconomic environment that drives different buying behaviors, with consumers becoming more value-seeking; that's what we're seeing from our customers who are broadly aligned with the volume trends that we're also seeing. A final comment, if I may, is that there has been a little more softening on the Berry side than the legacy Amcor side, but don't forget, while the trends are the same, Berry has a higher exposure to North America and also has some exposure to industrial end market segments like unconverted film that have seen a bigger impact. I just want to add here, Michael is saying there was a second part of the question, which was absolutely right. The value-based pricing. We see opportunities for value-based pricing going forward. In the context of our commercial synergy work streams, we're looking at deploying best practices from both sides of the legacy businesses. We believe that the value-based pricing that Amcor has worked on for many years in the past is an opportunity for us to evaluate pricing across the Berry portfolio, and we're going to make use of that.

I wonder if you could give any more detail on the $1 billion under review that isn't the North American beverage business, understanding those are smaller businesses from a geographic standpoint or a product standpoint, or just sort of strategically, what characteristics do they have?

Yes, thanks, Anthony. Happy to do that. First off, we're talking about ten businesses that make up the $1 billion. The businesses are distributed between the two legacy businesses, so you will find some of them in the legacy Amcor portfolio, and you will find some of them in the legacy Berry portfolio. In terms of the criteria that we have applied, let me help you with that a bit, and I spoke about that, and some of those are summarized, I think, on Slide 10. High level, we asked if our businesses that we now have on a combined basis have an attractive growth margin portfolio, which is obviously a consideration over the long term. How do we feel about the industry structure, which involves questions like: Are we exposed to large markets? Do we have room to grow? What are the barriers to entry? Then a third criterion is scale and leadership. We asked if we have significant share in that category or are we large in that category as a combined company? Where businesses failed one or a combination of these criteria, we put them aside, which makes up the ten businesses plus North American beverage. One more comment to provide a bit of flavor about what we're talking about: These are businesses with a more cyclical end market exposure or consumer packaging related, hence a little more stable. Consider a single market where we have activity, but we are participating more than winning because we aren't well-positioned in that market. If we determine that to get to a #1 or #2 position in that market, we would need to deploy capital, which we currently prefer to allocate to other opportunities.

Just further to an earlier question, just around any other market share shifts to call out, as well as just in terms of, I suppose, talking to the volume performance, any market share shifts to call out? Has there been any destocking by your customers that you've seen? Obviously, that has been something that we've seen in the past.

Yes, thanks, John. I'm going to keep it really simple here and try to help you understand that market share shifts or share gains or losses, particularly given the volume performance, is not the driver. We're laser-focused on that, and we're really trying to understand where the performance comes from. It really comes down to consumer and customer demand. Share is not the issue, and neither is destocking. A couple of quarters ago, we saw a structured and broad approach from our customer base to reduce inventory levels to more efficient lower levels. We've literally gone through that. Even in the healthcare business, which was lagging this whole trend, we have significantly improved. I couldn't tie any of that back to destocking. Where we might see destocking, I would call that more either seasonally driven stock movements, which we've seen beforehand, or maybe tactical inventory movements, but nothing that we've noticed significantly before.

Congrats on getting the integration there started. Just looking at that $260 million number, it looks like that's about $0.10 of accretion next year. Maybe you can just put that in context. So does that kind of accelerate through the year, as you said, probably will be back half loaded? You already have cut some headcount. So I guess, is that going to be the main driver? Maybe you can just discuss some of the logistics actions and some of the other integration efforts you will undertake to achieve that $0.10. How does that, or that $260 million, proceed from there? Do you expect to be maybe at 80% in year two? Or what should we think regarding how the synergies kind of come in?

Thanks. It's Michael here. I can take that one for you. Yes, you're correct, right. We called out $260 million in our guidance as synergies, right in line with the timing we've pitched from the start. So we're reaffirming that and feel really confident around that. That's about 40% of the $650 million, and we'd expect it to '27, just to answer that question, another 40% with 20% coming in year three. The split of synergies in FY '26: $240 million of it is cost-related, and about $20 million that we see in financial synergies on the interest and tax line there for you. The $260 million is, of course, pre-tax. So from an EPS standpoint, it's about $0.09, which contributes to the 12% baseline growth that we discussed to achieve that bottom end of the range of $0.80. We feel really confident that we will achieve that through self-help actions. In Q1, we expect that the phasing will be around $35 million to $40 million, about 15% of the total for the year. Probably, as you progress through the half, it will sit around 35%, meaning about $90 million of the balance would come in the back half of the year, as we exit strongly in Q4. Of the $240 million costs that I called out, the majority is expected to be G&A and procurement, with a little bit of operational improvement and small growth synergy included in that.

Just a quick one from me. If you could give us a little bit more color on the operational issues within that Rigid beverages business and perhaps maybe just quantify that impact.

Yes, Ramoun, I'll be happy to do that. Let me start and then I will hand it off to Michael for quantification. Look, I'm going to say very loud and clear. We're not happy with the performance of the North American beverage business in the fourth quarter. If I summarize simply what actually has happened, the business rightly focused on taking costs out, particularly in the first half of the year to support earnings in a lower volume environment. As we then approached the fourth quarter, which in that business is seasonally the highest volume quarter, we ran into service issues for our customers. That was due to out-of-region supplies and drove higher waste levels along with increased labor costs in the business. We're not proud of it. Flexing our capacities with volumes is something we're very familiar with. In this case, we clearly did too much of that, but we're going to get that fixed. Regarding quantification, Michael, do you want to take that?

Yes. To put a bit of color around that, you can see from the results that year-over-year, if you exclude the Berry cap impact because we know that was in the prior year, that was about $7 million. If I take that out, the business in North America beverage was down primarily around $20 million. It was a reasonable decline versus the prior year. To PK's point, we're not satisfied with that. It was really a combination of labor. We started to build labor. There were a couple of big plants where the volumes did increase, but we just couldn't operationally manage those. So we incurred some higher labor costs, less fixed cost absorption, and we had some out-of-region freight to service customers. That really drove the decline in the high cost base versus the prior year. We're addressing it. PK has again touched on that. We're still expecting some elevated costs in Q1, and we will drive improvement from there.

Congrats on closing the deal and all the progress. You're guiding to adjusted EPS of approximately $0.80 to $0.83. What type of volume growth is embedded in that forecast? And relatedly, you also mentioned you expected an elevated cost base for North America beverage to negatively impact Q1. How should we think about the impact that North American beverage has on that EPS forecast through the balance of fiscal '26?

Yes, thanks, Mike. I can start there. From a demand environment standpoint, we are not anticipating any notable improvement. We're still looking at volumes being pretty subdued. So we're giving you a guidance range of $0.80 to $0.83. The underlying principle is that volumes are expected to be flat, so you won't see much revenue growth there. If we see any improvement, that would help us reach the top end of the range. If it were worse, we would take costs out to manage that. That should help offset that as well. From a beverage standpoint, we will still see some elevated costs in Q1. The underlying business again in Q1 is expected to be fairly similar to Q4, maybe a bit better, but nothing materially different. We will handle the cost base with a strong focus in Q1, but we will also get the synergy delivery. So we're expecting that $35 million to $40 million in synergies come through, which contributes to about 8% EPS growth.

Just a question relating to the North American beverages business again. So sorry for elaborating the point, but quite clearly, it's been identified as an asset for sale, but also quite clearly, it's underperforming at the moment. So I just want to try and understand the process in a bit more detail. I mean, obviously, you'll be looking to divest or do something with that business when the earnings power is right. But what gives you a degree of confidence that there is a line of sight to improving business performance? You've mentioned a few aspects already, but if you think about the fail-safe measures, the day-today operations, what are the parameters that you're looking at before divestment there, please?

Yes, it’s a good question. I want to emphasize that the operating performance of the business in the short term shouldn’t dictate your strategic assessment of the portfolio. These are two separate matters. It can be challenging to distinguish them, especially given the recent circumstances. You can evaluate the strategy while also considering the less than ideal operating performance, but it's important to keep them separate. In the current situation, we plan to focus on stabilizing the business, which will likely take a couple of quarters. I believe it’s essential to stabilize the business before we can realistically think about taking it to market. This process won’t take an excessive amount of time, but it will require some effort. Once stabilization is achieved, we will quickly evaluate our options for this business, just as we do for all our businesses, including the ten plus the North American beverage sector. We will do this in partnership with our customers, who need to support our actions. Finally, we must reach alignment on value considerations and timelines because, once we identify non-core businesses, we want to make progress.

PK, just curious, how are you thinking about the timing of potential growth investment or even share buybacks? Noting, obviously, you're targeting a reduction in your leverage. There's also potential there for divestments. I'm just curious to get an understanding regarding your target leverage in terms of those opportunities?

Yes, I can take that one, Nathan, it's Michael here. Thanks for the question. We are committed to maintaining an investment-grade credit rating, as we've stated throughout this transaction. For us, that means a leverage range of 2.5 to 3x. As we discussed today, we are outside that range, which is in line with our expectations at this point. So the first priority is to deleverage and get that leverage back into range. Our strong cash flow in FY '26 will contribute to achieving that, and you see a delevering down from the 3.5x we are at today to about 3.1 to 3.2x. This excludes any proceeds from portfolio optimization, so if we obtain any proceeds there, we will prioritize using them for further deleveraging to pay down debt. Once we are comfortably within that 2.5x to 3x range, we will then start to consider capital allocation, particularly regarding share buybacks, but also other M&A opportunities. We won't discount those, but the priority will be delevering and getting back into that range.

Just one on Berry and accretion. Back in the last results call, we talked about being $0.01 per share accretive in the June quarter. How should we think about that for FY '26, I guess, accretion from the deal before synergies? Can you comment on the magnitude of the EBIT performance, I guess, probably decline in Berry in May and June '25 versus the previous comparable periods?

Yes, I can start on that, Brook. Thanks. The Berry combination did have some contribution to our EPS in the quarter, roughly $0.005 to $0.01, which is what we kind of referred to back in April. It's always going to be a factor of income versus share count and how it flows through. The $0.712 we reported is pretty similar on a combined basis. Looking forward, we feel good about the 12% to 17% EPS growth that we are guiding to next year. A significant part of that will come from the accretion due to the synergy delivery. So we feel good about the contributions there. In terms of Berry’s EBIT performance, it was quite similar to Amcor. You heard PK touch on the volumes, and notwithstanding Berry doesn't have exposure to the North American beverage business, volumes were down slightly, predominantly in North America. At the net income line, we were off around 4% to 5%, which is a good proxy for where Berry was.

I just wanted to go to Slide 22, if I could please. Michael, you might be able to help with this one. There's an adjustment to the statutory to adjusted EBIT. It mentions inventory step-up amortization in Note 2, with a value of $133 million. Could you just step me through what that is, please? Obviously, there's only a modest period for that included in fiscal '25. Can you just describe how that might look in '26 as well?

Yes, that's just standard purchase profit accounting adjustment. It's for two months; it's all done. There's nothing further to come in FY '26. I would mention that the opening balance sheet and the numbers provided – the PPA, or purchase price accounting, is an estimate based on the information available at the time. We can update that within the first 12 months. Essentially, this particular entry you mentioned brings inventory in line with market value. It's a standard adjustment, particularly relevant for deals of this size.

Thank you, operator, and thank you, everybody, for joining us. I want to keep it simple at the end here. We're confident. I think we're moving pretty fast. Let's not forget that we closed this acquisition in five months. We're now 100 days in, and I feel really good about the synergies. We have challenges in the North American beverage business that we're not proud of, but we're responding to those, and we're confident about 12% growth in fiscal '26. I look forward to the opportunity to engage with you over the course of the quarter. Thank you very much, and that concludes the call.