Amcor plc (AMCR) Q2 2015 Earnings Report, Transcript and Summary

Good morning, and thank you for taking the time to attend Amcor’s Interim Results Conference Call. It’s Ken MacKenzie speaking. And with me I have Ron Delia, the CFO and CEO elect. Ron and I will take you through the results this morning, and then as usual, we’re happy to open it up for questions. Moving to Slide 3, as we do with all our internal meetings at Amcor, I would like to start with our safety performance. At Amcor, we’re committed to a goal of no injuries. In over many years, Amcor has made tremendous in-roads to improving our safety performance, and I’m pleased to say that this has continued. In the last 12 months, our lost time injury frequency rate has declined to 0.4, in our recordable case, frequency rate is 2. These indicators reflect the number of incidents per million hours worked. In addition, at the end of December, over 50% of our sites around the world were incident free, so that’s no injuries. And while our current levels of performance make Amcor a truly world-class company in the area of safety, we must continue to drive improvements in this area, it’s our number one priority and even one injury is one to many. If we move to Slide 4, before proceeding to the results, I just want to give an overview of where Amcor is today, and this will assist in understanding the context of our performance. If you look at the middle pie chart, you can see that it’s a very focused business, two product segments, Flexibles and Rigid Plastics packaging with a global market leader in each of our chosen end market segments; food, beverage, healthcare, and tobacco packaging, and you can see the split on the left-hand side pie chart. The business has a combination of good industry structures, scale positions, and differentiated value propositions. If you look at the right-hand side, you can see we have a global footprint. We’re operating in 43 countries, and we have a unique position in emerging markets at 32% of sales. All of this is supported by our proprietary operating model the Amcor Way and solid financial metrics in cash flow. And the key message from this slide is that Amcor has been transformed, and today is very well positioned as a global leader in its chosen market segments. If we move now to Slide 5, shows the key financial information for the half year. Now a reminder, this is the first period that we’re reporting in U.S. dollars. Earnings per share were up 6.8% and on a constant currency basis, up 10.4%. The dividend is up 9.2% to US$0.19 per share, and it will be paid in Australian dollars as $0.244 and that’s up 24.9% expressed in Australian dollar terms. Returns continued to improve to a first-half record of 19.2%, and on a full calendar year basis, returns were 20.4%, and this is the first year returns for the business have exceeded 20%. Operationally, net margins increased from 10.3% to 10.8%, and the operating cash flow was up 55%, and as Ron will go through in a minute or two, the balance sheet is in very good shape. So the key point from this slide is the result of strong and there has been continued solid improvement across all the key metrics. Moving now to Slide 6, today we’ve also announced US$500 million on market share buyback. The company has strong financial metrics. Leverage measured as net debt to EBITDA is 2.2 times, and interest cover measured as net interest to EBITDA is above 7.5 times. The company continues to generate strong cash flow and following the buyback, the balance sheet will remain strong. Now, the sizing of the buyback at US$500 million, balance is returns to shareholders, maintains flexibility to pursue growth, and also our strong credit metrics. Moving to Slide 7, few more highlights for the year. There continued to be solid organic profit growth of 3% to 3.5% across the business. In emerging markets, organic profit growth was 10%, and this was an excellent outcome reflecting strong growth in Latin America and continued solid growth in Asia. In developed markets, economic conditions continue to be subdued, and there was stable operating performance in these regions. Acquisitions delivered as expected and were a key contributor to growth. With 16 acquisitions over the past four years, it is pleasing that these acquisitions have delivered the 20% return we expected. In over the past six months, there have been new acquisitions and greenfield investments announced that will continue to drive growth. So all up, this resulted in a 10.4% increase in earnings per share on a constant currency basis and together with a 4.7% dividend yield, this means that value creation was an annualized 15.1%. Now, this result was consistent with our model for shareholder value creation, so we move now to Slide 8, and we map it against the different components. The dividend yield was 4.7%, and that is slightly higher than the expected long-term average of 4%. The organic growth was 3.4% and this is marginally below the long-term expected growth rate of 3.5% to 4%, as developed markets remained broadly stable. Acquisitions contributed 3.3%, which is consistent with expectations. So as I mentioned all up, this resulted in a 15.1% value creation and the bridge for the specific components is in the appendix slides. So with that as my introduction, I’ll hand it over to Ron to talk you through the cash flow and the balance sheet for the period.

Thanks, Ken. We’ll look at Slide 9 to talk to the cash flow, and the key message here is that cash flow was very strong, and we remain on track to produce between $200 million to $300 million of free cash flow again this year, which is in line with expectations. More specifically on the Slide here, the operating cash flow of US$103 million for the half was up 55% on the prior year. And when we look at some of the key components in that result, gross capital expenditure for the half was $156 million. When we add total restructuring expenses of about $20 million, the overall spend on CapEx and restructuring was $176 million. Now that compares with our depreciation and amortization charge of $183 million, so essentially in line with what we would consider to be the normal amount of reinvestment back into the business. In net working capital, cash outflow was as expected given the seasonality of the business. We’ve talked about that in prior half-year results. And the working capital performance through the half, which we measured primarily through the average working capital to sales ratio was particularly strong, and that metric improved from 9.5% last year to 9.2% of sales this year. The other line on the cash flow statement here on Page 9 is a combination of items, largest components relate to non-cash PBITDA, which we need to back out and then proceeds from the sale of PP&E. Property sales were higher than last year, and that’s the key variance of the - key driver of the variance on this line item. But again the key point around the cash flow from this slide is that the cash performance was very strong and we continue to expect $200 million to $300 million of free cash flow for the full year. Moving on to Slide 10, we have a snapshot of the balance sheet and the debt profile. Again, as Ken mentioned earlier, in addition to the cash flow strength, the balance sheet of the business is in very good shape. Net debt has remained around US$3 billion and the two main ratios we look at, which are both cash flow oriented in nature, leverage and interest cover have both improved versus the prior period. So that left us with the well positioned and with the capacity to raise our dividend, as well as turn out to $500 million share buyback that ken spoke about earlier. And we will retain a solid balance sheet, and more importantly, we will retain ample capacity to pursue growth and organically or through acquisitions. Now in terms of financing costs, interest costs, our guidance remains the same, it’s a US$180 million to US$190 million for the year. And that takes into account the buyback as well as current exchange rates, so no change to the interest guidance. In terms of the debt profile we are in a really comfortable position. We have a low level of refinancing this year. We have excellent debt maturity, and a good mix of fixed and floating debt, and we’re comfortable with the currency mix as well. So in summary from me the key messages this morning are that the business is very well positioned financially, cash flow was strong for the half, and the balance sheet is in a very good place gives us the flexibility to continue to grow, continue to raise the dividend and in this particular result announce a share buyback. So with that, Ken, I’ll hand it back over to you.

Yes. Thanks, Ron. Moving now to Slide 11, the Flexibles segment had another strong half with PBIT up 4% in constant currency terms and excluding one-off gains. The key drivers of this increase were growth in emerging markets, innovation driven products mix improvements, better operating efficiencies and contributions from acquisitions. The sales margins continued to increase expanding from 11.7% to 11.9%, again excluding off one-off gains. The Flexibles Europe and Americas business had relatively stable volumes and developed markets and continue to bring new innovative products to market. And for those who are interested there are three or four examples in the press release. The Asia Pacific business had a good half-year with higher earnings. Growth across Asia remains strong, despite some customer destocking in China over recent weeks. And acquisitions are delivering strong benefits in line with expectations. The tobacco packaging business performed well with growth in emerging markets, the ongoing trend towards premiumisation and benefits from acquisitions in the Americas and Asian regions. So the outlook for the Flexibles business remains unchanged and it’s for higher earnings. The drivers of this will predominately be growth in emerging markets, benefits from acquisitions and ongoing margin expansion through innovation and operational improvements. Moving now to Slide 13, Rigid Plastics; now the Rigid Plastics business had a strong half with earnings 8.4% higher than the prior period and returns improving to 17.4%. Volumes for the North American business were 2.5% higher than last year. And if we break that down into the sub-segments, custom hot fill volumes increased 5.6%, and carbonated soft drink and water volumes were just modestly higher with the ongoing mix shift from blown containers to preforms. Overall earnings of the North American Beverage business were higher. The Diversified Products business had a strong half with higher earnings and returns. This business is benefitting from improving mix and a great focus on innovation. In Latin America, the business performed very well with volume growth of 7.5% and volumes were higher in all businesses except Argentina, with the business in Brazil performing particularly well. So the outlook for the Rigid Plastics business remains unchanged from the full-year results. Earnings are expected to be higher, benefitting from continued growth across all business units, and the magnitude dependent on general economic conditions in Latin America and weather conditions for the balance of the year in North America. Moving now to Slide 15, so in summary this has been another strong half. From a financial perspective we achieved a solid result with strong cash flow. Returns for calendar year 2014 were above 20%. We’ve announced a strong increase in the dividend and additional return to shareholders through a US$500 million share buyback. There was continued good growth in emerging markets and developed markets remained stable. Margins continued to expand as we focus on innovation, improved product mix and reduce costs. And the acquisition pipeline remains robust. So all up we look forward to another year of higher earnings in 2015. So with that being our introductory comments we’re happy to now take questions.

Yes. Mark - sorry, Michael.

Hi again, Michael Ward from CBA. Emerging markets, you seem to have done pretty well, you seem to be enjoying better timing and your customers are enjoying in emerging markets. Can you maybe make some comments around where the difference is between your business and maybe in customers businesses?

Yes. Thanks for the question, Michael. We have had a strong half in emerging markets, overall growth in emerging markets was 15%, and 5% of that was contributed from acquisitions and 10% was organic growth, so a pretty strong result, but to be quite frank in line with sort of the trend that we’ve had over last five years in emerging markets, so very much, very much in line. We had emerging market organic growth across all the business groups and in all the regions. I think the standouts - if we were to go through the results, the standouts would be in the Flexibles segment; Indonesia, India, Philippines, Singapore, so sort of the Southeast - Southeast Asia band would be a standout from a growth perspective and very pleased with the Latin American result. Volumes were up 7.5% across the region. Brazil was a standout, we were up 12%. PET continues to take, and I think this is - this will answer the question around the difference between us and perhaps our customers. Our customers would be reporting overall growth whereas we’re package specific. And so, PET continues to gain market share vis-à-vis other packaging formats like glass and cans in Latin America, and we’ve also gained market share, so those two would contribute to perhaps our performance versus what you saw in the broader market. But overall very pleased with the results, and I think on top of that, it’s not just the top line, we’ve had very good margin expansion and very good cost control through the region in the half as well.

Can you also maybe comment around resin? It seems like you’ve got a little bit of benefit in the first-half, but can you maybe comment more around the outlook for the second half given what we’ve seen with oil pricing?

Yes. There really was no benefit. As a matter of fact, I think it was a slight headwind in the first half from raw material costs, but there is no - you’re right, there is no doubt that raw material costs are coming down, I mean the price of oil has literally halved in the last six months. So talking about the specifics, raw materials in the first-half - our index, which is looking at our basket of raw materials that we’re using across our business, our index in the first half dropped 8% and most of that would have been in the last couple of months, and it dropped a further 8% in the month of January alone, so 16% in the last quarter let’s say drop in the index for our raw materials. Now nothing has changed in our model, about two-thirds of our businesses is contracted pass-throughs and one-third of the business is non-contracts, so we move prices as and when the raw materials move. For those businesses where it’s two-thirds contracted, there is a lag impact. So when raw material prices are going up, there is a lag impact in us pushing the raw material costs through the customers, it takes three to six months, and on the way down, there is a similar lag and that the benefits aren’t passed on to the customer for three to six months. So all up, we do expect some benefit in H2 and from the drop in raw material prices, but the magnitude at this point - it’s not possible for us to quantify.

Sorry. Well, but as a reminder, can you just give us a rough sense of what raw materials is as a percentage of your overall costs?

About 50% to 60%.

Yeah, thanks.

Richard Johnson from Citi. Ken, just going back to emerging markets, just two questions if I may, if I press the numbers on my calculator correctly, which I may not have done, it looks like Eastern Europe wasn’t too much of a drag on growth, but perhaps you could talk a little bit about Eastern Europe and what the outlook is for that business. And thinking think about Rigid South America, if you think about the volume number than the overall sales growth, how much of that of the price accretion is resin, if anything, or how much is real price increases? Thank you.

Right. You’re right, Eastern Europe wasn’t a drag. We typically talk about Eastern Europe being in the sort of 4%, 5% growth across the product range. Flexibles would have delivered - the Flexibles product segment would have delivered numbers in that order. In the case of Tobacco Packaging, there were tax increases in Russia and we actually had close to double-digit declines in volumes in Russian Tobacco Packaging. Now offsetting that was the introduction of a number of new innovative products, now we’re very much participating at the high-end of the product range in Russia, and we were able to bring a number of very exciting proprietary technologies to the market. And so, margin expansion offset volume weakness and we actually had improved profitability year-on-year in Russia. So Eastern Europe was a very good outcome there, largely driven by mix improvements, and we did have some soft volumes in some places. In the case of Latin America, sorry, Richard, the question was..

Just around the sort of price volume calculation, what do you think of the revenue growth that you have shown?

Yes, Richard, we always caution a little bit around looking at the sales line in this business, right, because of the raw material fluctuations through that. There is an added caveat when it comes to Latin America because of the high inflationary environments we operate in, particularly in Venezuela and Argentina, you’ll see very pronounced increases in revenue to compensate for production costs, which are further down the income statement. So that’s the predominant driver of the top line movement there. It’s very hard to disaggregate. I think the key message is that the volume growth in the region was 7.5%.

Thanks.

So Ken, just the comment about China and the destocking that you have seen, I’m just wondering how widespread that has been and how long you expect that to continue for?

Right, great question. So China volumes H1 for Amcor were up 6.5%, but if you strip out the acquisitions, volume organically would have been up 2.5%. Now that would compare to we are normally talking about double-digit, low double-digit volume growth in China, so clearly below trend. In the second quarter of the financial year, we did see destocking happening in the market, so there was a destocking event. So the first quarter was trading broadly in line and then in the second quarter, we saw this destocking event. Given that we’re now heading into Chinese New Year, we probably won’t get visibility on what underlying growth is until we get to about April. But our experience whether we would be in a global financial crisis or when we’ve had other economic events is that in our business it’s very defensive. There is a destocking event while the supply chain realigns itself and then we see a returning to underlying growth. So we’ll be in a position to update that come - the August result, but they won’t be until April until we see we have some visibility around all of that.

And, Ken, was that fairly widespread throughout China or was it…

Yes.

…designated to particular products?

No standouts.

Thanks.

Hi, Ken, Michael Courtney from Merrill Lynch. Congrats on the result.

Thank you.

My question is just around acquisition, so it’s been a while since there was an acquisition of significant size, but the previous acquisitions as you say in the report still contributing 3.3% to the growth. Just wondering if you were to assume there’s no more acquisitions for the remainder of this year, if we then look at FY 2016, 2017, how quickly does that 3.3% taper-off from those previous acquisitions, because some of them would be a fair way through their synergy benefits now I would imagine?

Right. First and foremost nobody here is giving up an acquisition pipeline, it’s robust. So it’s very much a hypothetical question. When we look at the acquisition pipeline today, in the last five years you’ve heard me talk in a range between $1 billion and $3 billion, and we’re very much in the middle of that that range today. So where is busy now as we’ve been over the last five years working on acquisitions and we have announced a couple, by nature, it’s going to be lumpy, and I think that’s your question. It is going to be lumpy, that’s how we say, we do the deals that we can do, and we pass on the deals that don’t make sense. But that being said we’re well resourced. We’ve got a very capable M&A team. We’ve got a very full pipeline. We’re working on 40 projects, as we speak, and we’re right in the middle of that acquisition pipeline range. And as Ron talked about the balance sheet, the balance sheet has $800 million plus of capacity. So we’re in a good position, as it relates to our acquisition agenda, and we feel really good about our acquisition agenda. When we look at acquisitions, it tends to be about three years to get to the 20% return. So it depends what the acquisition EBITDA return on investment is, but typically, we’re at the value end of the market, and we’re buying developed market assets at five or six times EBITDA, and we’re buying emerging market assets at sort of seven or eight times EBITDA. So the return on investment broadly is going to be around 10% year one, and then its synergy benefits that we’re bringing to the acquisition that ramp up over the two-year or three-year period that bring us to the 20% return on investment that we target, and that’s sort of our history, sometimes a little bit faster, sometimes a little bit slower, but broadly it takes us three years to get there. So you could look at the acquisitions that we’ve done and build a bit of a pipeline and look at where we’re at in terms of projecting forward if there are no acquisitions. We don’t do that work, because we’re actually projecting for that we’re going to continue to make the sort of acquisitions that we have been doing.

Just on the numbers that you’ve given the $1.3 billion to $3 billion for the opportunities, you do some simple division and it sort of implies that there’s nothing of significant size in the pipeline, because $3 billion of Autobuf [ph] already, it’s pretty small ticket price going forward, should we be thinking about it as the smallest sort of bolt-ons but just with the high level of frequency?

Yes, this is a bit how we look at things internally, and it’s always - we always have to be careful about how we characterize the acquisition pipeline. The growth execution pipeline in the $1 billion to $3 billion that we talk about is, we’ve really taken a look at all of the market segments that we’re interested in across our portfolio on one access and on the other access is all the geographies that we want to participate in. And so we’ve done a very detailed analysis in the marketplace. So, for example, medical packaging in China, what’s the opportunity there? And so we’ve done this big 2x2 mapping exercise, we did about five years ago, we identified all the opportunities that we’re interested in. And they go into sort of think of it as a hopper. And out of that hopper, we then prioritized the opportunities based on, is it available? Is it likely to become available? What’s the return? Where does it sit from a strategic perspective? And so there is a big prioritization exercise that goes in and then we work on the projects that we have in priority based on the resources that we have in the business to work against them. And that’s when - so it’s a big hopper of more than 40 opportunities, but any one time, we tend to be working on between 20 and 40 opportunities across the business, because that’s where resource stop to do. Now outside of that, for example, I mean, it’s well known, we missed out on the Constantia deal, but the Constantia deal wasn’t in the pipeline. Other big deals aren’t in the pipeline, they are in the hopper, but they are in the pipeline, because quite frankly some of these assets we know aren’t available. So you’ve got to be and but then circumstances change and then they do become available. So it’s a - it’s very dynamic. It’s - I think you need to take a look at the pipeline as, when I talk about the $1 billion to $3 billion, you need to take that as a guide. The reality is, we’re very busy, and there is no shortage of opportunity. I think the great thing about certainly the flexible packaging space is although we’re a market leader, although we have a large-scale position, although we’re very differentiated, there is still, it’s still quite fragmented and particularly in emerging markets. And so there is a deep opportunity space for acquisitions in the flexible packaging space.

Thanks for that. Can I just ask one more quick question just on market trends, just in Europe, that begs some questions all over some weightness in volumes out of Europe and it seems as though your competitors and some of your customers had sort of characterized the calendar years as a strong first quarter and a strong last quarter, but quarters two and three had been fairly weak. Three half, had you seen any noticeable change in the market conditions in Europe?

Quite frankly no. And that’s likely because we’re very defensive in Europe. If you look at the product segments in which we participate, it’s tobacco, healthcare, and food, so there are three very defensive segments. We’re a bit of a broken record here about Europe for the last five years, we’ve had very stable conditions, and that’s just the nature of our business. Thank you. Scott?

Good morning. It’s Ramoun Lazar from UBS. So just a couple of questions, just, Ken, maybe could you touch on the market trends that you’re seeing in North American regions, some good growth in that hot-fill custom segment. Was that a bit of a recovery after last year’s sort of seasonal weakens or are you now starting to see some underlying growth coming back to the market?

It’s a great question, Ramoun. I think a bit of both, where we are cycling a little bit of a weak comp on the custom beverage side, but we’re cautiously optimistic about the economic conditions in the U.S. I think with certainly in the second-half with a good momentum in the first-half and when we look into the second-half, there is a reason for optimism with the oil price having the cost to fill up your car in the U.S. is less and a lot of our volume goes through convenience stores, people have more change in their pocket. I think we’re optimistic about continuing the momentum from the first-half into the second-half in the Rigid Plastics base. But it would be combination of a slightly weaker comp last year, but also more favorable conditions.

Okay, great. And just one for Ron, just on the operating cash flow, Ron, can you just talk about seasonality in that business and what we should expect from operating cash flow in the second-half given conversion was a little bit weaker in the first-half?

Yes, Ramoun, operating cash flow is a metric we focus on at the half and in general, the cash flow is quite seasonal, the business is seasonal. So it’s 45%, 55% split, more or less in terms of sales and earnings. Cash flow is even more weighted towards the second-half and cash flow is even more seasonally skewed towards the second-half. So that’s the pattern. If we go back and look over the last ex-number of years since Alcan and ball, and the portfolio is shaped away as it is today, you see this outflow in the first-half. So we would say that it’s sort of right on track and the guidance and the thing that we really look at for the full year is the free cash flow, which is after dividends as well. And we continue to expect to have free cash flow between $200 million to $300 million this year. So we don’t get too hung-up in the seasonality, we know what it is. It’s very - the pattern recognition is there, and this result would be right on sort of trend.

Hi, Ken. It’s Scott Hudson at CLSA. Just with regards to, I guess, emerging market acquisitions, are you seeing your customers move into any other regions, or are they moving into regions that they wanting you to follow into?

Yes, great question. I mean, our customers lead our participation. So if you look, for example, in emerging markets, our major customers would have, at least, 50% of their portfolio in emerging markets, and we’re sitting at 30%. And that’s because they’ve got to go and build the business, they get their business to a certain scale and then they want a packaging supplier that’s capable of taking them forward with innovation and local supply and all the benefits that we can provide. So we’re playing a bit of a catch-up game versus our customers particularly in Asia. And then to your question looking forward, clearly, there is a lot of investment and we’re going into Africa. Right now, it’s not at a point or a scale, where in certain parts of Africa, it would be of a scale that would be of interest to us. But in other areas they still have some work to do to get further in front of us before we’re able to make investments there. But that’s clearly one of the regions which is a white space for Amcor that that’s on the horizon.

Got it. And then maybe this question for Ron, given where bond deals are et cetera., and I guess returns where you - the bond yields globally a pretty low, how does that affect your thinking with regards to the 20% hurdle rate?

It doesn’t change your way you are thinking at all. I mean, biennials ebb and flow, and asset prices ebb and flow, our long-term view on the attractiveness of investments comes back to that 20% pre-tax return. And we’re not changing that because of where we are in the credit cycle, that’s what we’re steadfast when we look at capital projects and we look at acquisitions through the same lengths of the 20% pre-tax by year three is the right measure for us.

Okay. And lastly, maybe just one for Ken, six months ago how did you scorecard your Amcor’s innovation, I guess, capabilities as you’re departing the company?

Great question. Industry leading, but lots of room for improvement. So on the packaging scale we’re an 8 out of 10, on the broader innovation scale, we’re 5 out of 10. So the new guys got a lot of work to do.

What’s the difference between packaging and broader scale, how do you - what do you sort of pinpointing on that?

Yes. I think that Amcor has developed really good capability and process around customer back innovation. So we’re very good at working with our key customers, understanding what their plans and what their needs are, and then collaboratively working with them to bring new products to market, that’s sort of our bread and butter, I think we’re very good at that. In terms of understanding consumer needs and translating that into new breakthrough technologies, similar to what we’ve done with LiquiForm, I think we still have more work to do there.

Thanks.

Good day, John Purtell from Macquarie, just a question on Latin America, I mean always a volatile set of countries over there, but it looks a very strong result. I mean in summary, it appears like a whole range of things winch away, which doesn’t always happen, but whether a shift in the PET’s substrate new investment. I mean, how do you view the sustainability of that result going forward?

Yes, look, John, I think the result, if you looked at our trend over, let’s say, last five or six years, Latin America would have been in that 5% to 7% range, but it is volatile. We would have reported numbers here of 2% or 3%, and we would have reported numbers of 10% or 12%. So this is - it’s a solid result at the top end of the range. I think what makes it very pleasing is that our value proposition is working with the customer base. We have gained market share at the right margins in the region. And so we have grown our market share and the PET continues to be the package of choice for the consumer. So I think all credit to the Rigid Plastics team who have done a just a great result both growing market share and also the operational performance across all of Latin America for the half was very good.

Ken, sorry, can I just follow-on from last question on about Chinese destocking, what’s the market intelligence? Is that the real underlying weakness and demand, or could you argue it wouldn’t be a surprise if you’re getting destocking simply, because you’ve got a raw material price coming very, very fast, decrease coming fast?

Look, that’s possible, Richard. Look, our experience in our business given that and China is no different. Given that we are consumer staples, there are destocking events when there is some weakening demand and the supply chain realigns, but then it picks up. I mean, if you look at the ultimate financial crisis, in the GFC, that’s exactly what happened. If you look back at our numbers, we had a three or four-month period where there is always some supply chain destocking and then volumes came back to GDP and move forward. So, this is a stable defensive business made up of consumer staples. I would - at this point, it looks very much like a destocking event that you see when economic growth declines a little bit, but in this business, people still need to eat and drink. And so, we expect volumes will move back to underlying growth. Might take a question from phone line, I see Larry Gandler is on the line, Larry?

Hi, Ken, thanks. Not to detract from a great result, just focusing on the Europe and Americas Flexibles revenue growth, it looks to be about 1.5% expressed in euros, given the weakness in the euro I would have thought that growth might have been a bit stronger. Just wondering if there is any particular segment that may have detracted from that revenue performance?

Yes, thanks, Larry. Look, I would characterize - the Europe result has been on trend. You’ve got to be very careful and Ron talked about it earlier, you’ve got to be very careful about analyzing the top line dollars in this business mainly, because it’s very sensitive to raw material movements. We’ve talked about it earlier 50% to 60% of our cost of goods sold is in the raw material. So if they move, we can be moving the exact same volumes, if the raw materials move up, the dollars move up and if they move down, the dollars move down on the top line. So I think you need to be very careful about how you look at the top line in our business. That being said, we would characterize that business as having stable performance in H1, and the team is doing an outstanding job continuing to bring new innovations to market and to keep the costs well and truly under control. There is a big simplification and standardization agenda that continues to bear fruit in that business and you can see it in the continued margin expansion that we’re having across the flexible packaging segment.

Okay. Great. So I would have thought raw materials would have added to revenue in that last half, but it sounds like you’re suggesting there might have been a detraction.

No, I’m just cautioning you not to look at the top line too much.

Okay. Great.

There are no questions on the phone lines. Are there any questions from the room?

Great. Well, thank you everybody.