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DATE
Thursday, August 14, 2025 at 8:00 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Peter Konieczny
Chief Financial Officer — Michael Casamento
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RISKS
The North American beverage business saw an earnings decline of approximately $20 million in fiscal Q4 2025 due to operating inefficiencies, including higher labor and freight costs. These elevated expenses are expected to persist into fiscal Q1 2026.
Combined volumes for the legacyAmcor(AMCR -13.93%) andBerry Global(NYSE:BERY) businesses were 1.7% lower compared to the prior year in fiscal Q4 2025.
Management confirmed that overall market volumes are expected to remain flat, with no significant recovery assumed in fiscal 2026 guidance, reflecting continued macroeconomic uncertainty and weak consumer sentiment.
Note: Amcor's fiscal year ends June 30.
TAKEAWAYS
Acquisition and integration-- Amcor completed the Berry Global acquisition, initiated integration measures, and is 100 days into combining operations, targeting €650 million in total synergies through fiscal 2028 and expecting $260 million in synergies in fiscal 2026.
Fiscal 2026 EPS guidance-- Adjusted earnings per share is guided to be $0.80 to $0.83 for fiscal 2026. This represents expected adjusted EPS growth of 12%-17% for fiscal 2026, driven primarily by synergy realization rather than volume recovery.
Free cash flow guidance-- Free cash flow is expected to double to $1.8 billion–$1.9 billion in fiscal 2026, after deducting approximately $220 million in integration and transaction costs.
Synergy realization-- Of the targeted $260 million in synergies for fiscal 2026, $240 million is cost-related, and $20 million is projected from financial items. G&A and procurement will drive the majority of near-term savings.
Q1 2026 EPS outlook-- Management projects adjusted EPS of $0.18–$0.20 for fiscal Q1 2026. This includes $35 million–$40 million in pre-tax synergies. This equates to approximately 8% growth from adjusted EPS of $0.162 per share in fiscal Q1 2025.
Legacy business volume trends-- Combined volume declined 1.7% from the previous year in fiscal Q4 2025, with North America driving sequential softness, and both flexibles and rigid packaging volumes down low-single digits year-over-year.
Segment results—Flexibles-- Net sales rose 18% at constant currency in fiscal Q4 2025, but volumes declined approximately 1.5% for the combined flexible packaging businesses. Growth in health care, protein, and liquids was offset by declines in categories such as snacks, confectionery, and unconverted film.
Segment results—Rigid packaging-- Net sales increased 121% at constant currency in fiscal Q4 2025, primarily due to the Berry Global acquisition. Overall segment volumes declined approximately 2% in fiscal Q4 2025. Adjusted EBIT rose 173% to $204 million in fiscal Q4 2025.
North American beverage segment-- Earnings fell $20 million year-over-year in the North American beverage segment in fiscal Q4 2025 due to cost overruns from operational disruptions, and the business has been re-segmented for direct management focus and improvement.
Leverage-- The net leverage ratio stands at 3.5x as of fiscal Q4 2025. There are expectations to reduce this to approximately 3.1x–3.2x within the next twelve months, excluding potential portfolio-related proceeds.
Portfolio review and optimization-- Management identified $2.5 billion in annual revenues from businesses “less aligned” with long-term strategy, including the $1.5 billion North American beverage unit. These figures represent combined annual sales as identified in the company’s portfolio review, and management will evaluate restructuring, divestiture, or partnership options.
CapEx guidance-- Capital expenditures are forecast at $850 million–$900 million in fiscal 2026. Depreciation is expected to be slightly above capex in fiscal 2026.
Procurement synergy durability-- Konieczny said, "the potential divestment of the North American Beverage business will not have a material impact on our ability to generate the procurement savings."
Q4 free cash flow-- Adjusted free cash flow for fiscal 2025 reached $926 million, in line with prior guidance and mainly due to strong fiscal Q4 cash generation.
End-market performance-- Focus categories such as health care, protein, and pet care delivered low to mid-single digit volume growth in fiscal Q4 2025, but broader categories including snacks, home, and personal care were weaker.
SUMMARY
Amcor(AMCR -13.93%) executives highlighted the immediate financial impact of the Berry Global acquisition, reporting considerable increases in net sales and adjusted EBIT across both main business segments in fiscal Q4 2025. Management detailed the combined portfolio’s strategic focus, noting that approximately 75% of total sales now derive from advanced, innovation-focused solutions. Additionally, 50% of core portfolio sales are concentrated in six “focus” categories expected to sustain higher growth and margin profiles. Initiatives are underway to divest or restructure approximately $2.5 billion in annual sales from operations deemed misaligned with Amcor’s strengthened core, including the restructured North American beverage division. Progress on some smaller assets is expected in fiscal 2026. Capital allocation priorities are centered on reaching a 2.5x–3x leverage target before pursuing buybacks or additional M&A. The call emphasized that earnings and cash flow growth for fiscal 2026 will be driven by internal cost actions and synergy capture, with management explicitly avoiding any forecast of a meaningful volume rebound due to persistent macro headwinds.
Konieczny said, "We will remain disciplined as we work through these processes, and there is no definite timeline for completion."
Adjusted EBIT margin in the flexibles segment was 14.1% in fiscal Q4 2025. The rigid packaging segment posted an adjusted EBIT margin of 10.9% in fiscal Q4 2025, reflecting changes from Berry Global’s inclusion.
Integration activities have included headcount reductions of over 200 positions, closure of one site, and approval for four more site closures within the first 100 days post-acquisition.
Michael Casamento clarified that the $133 million inventory step-up amortization related to purchase price accounting is complete and will not impact fiscal 2026 results.
Leadership confirmed, "Share is not the issue, and neither is destocking," attributing volume pressures solely to end-market consumption trends rather than competitive losses or customer inventory corrections.
Management stated the use of value-based pricing could be expanded across the Berry Global platform, leveraging Amcor’s historical success in this area to drive commercial synergies.
INDUSTRY GLOSSARY
TRIR (Total Recordable Incident Rate): A safety metric indicating the number of recordable workplace injuries per 200,000 labor hours, referenced as 0.27 for Amcor and 0.57 for Berry Global over specific periods.
Unconverted film: Packaging substrate sold without further modification, typically to converters or end users for additional processing.
Full Conference Call Transcript
Peter Konieczny: 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 one hundred days into combining two complementary businesses and 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 2026 with free cash flow expected to double to €1.8 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 in 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 three 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 number one priority. For fiscal 2025, 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 four 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 2028, including $260 million in fiscal 2026. 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.
And for these, we will explore alternatives to maximize value. Most importantly, our fiscal 2026 guidance reflects expectations for a year of strong earnings and cash flow growth, largely driven by self-help actions. Turning to Slide five 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 and for our consumers and customers in both our flexibles and rigid packaging solution segments through the quarter, particularly in North America. Overall volume performance across both legacy businesses was similar and on a combined basis were 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 in its 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. And 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'd like to talk about the progress we've made over the last one hundred days, integrating the Berry and Amcor businesses and the work we have done to define our core portfolio. Beginning with slide six 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 leading 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 opportunity discussed when we announced the merger. From a G&A cost synergy perspective, we have moved fast to begin eliminating duplication, lowering headcount by more than 200 until now. In terms of operations and footprint, we have been combining assets, identifying open capacity, repatriating outsourced film supply, 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 closure of four additional sites, and we're 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. And our teams have worked extensively with our direct and indirect suppliers in all regions, validating the synergy pipeline and delivering quick wins, will benefit earnings from the '26.
I'm happy with the progress we've made over the first one hundred 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 2026. We're confident in delivering EUR $260 million synergies in fiscal 2026 and a total of $650 million through fiscal 2028, and we are reaffirming both targets today.
Slide seven 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 come back to shortly. Slide eight shows our unique and expanded product portfolio with flexible and rigid packaging solutions to address the varied needs of our customers in these sizable end markets. This view also again 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 stand-alone basis.
We already have leading positions in these categories and plenty of room to grow given the fragmented nature of these markets. Slide nine 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, 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 JV ownership models, cash sales, or a combination thereof.
These actions will enhance 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. And 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 2026.
Looking forward, and as you will hear from Michael when he covers our fiscal 2026 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.
Michael Casamento: 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. And as a result, while both legacy businesses saw a similar overall volume performance in May and June, our volume commentary will be primarily focused 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 05/01/2025, 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 digit, 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, and pet care was strong. These gains were more than offset by softer volumes in other categories, including unconverted film, snacks and confectionery, and home and 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.
And 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 and the Global Rigid Packaging Solutions segment, which includes Amcor's legacy rigid packaging business along with Berry's larger scale Consumer Packaging North America and Consumer Packaging International businesses from the 05/01/2025. 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 America beverage.
As noted earlier, our performance in the quarter reflects ongoing soft consumer and customer demand primarily in The United States. Outside of The US, volumes in Europe were in line with the prior year and modestly higher in Latin America. By category, volumes grew low single digits across health care, and food service 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 Cap 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, and 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 and the balance sheet on Slide 13. Annual adjusted free cash flow of $926 million was within the guidance range provided in April, and 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 3.5 times exiting the quarter, taking into account combined annual earnings, and we expect leverage to fall to approximately 3.1 to 3.2 times over the next twelve months. This excludes the benefit of any proceeds received from asset sales through fiscal '26, which would enable us to delever 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 12-17%.
Our confidence in delivering 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.
And 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 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.
Peter Konieczny: 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 '28, reflecting the strength of our integration strategy and execution. We're taking definite actions that will improve the financial performance of our North American Beverage business. And through portfolio optimization, we're focusing the business on attractive nutrition and health markets. Each and all of these contribute to creating a stronger business and long-term shareholder value.
Operator, we're ready for questions.
Operator: Thank you. We will now begin the question and answer. Your first question comes from Matthew Roberts with Raymond James. Please go ahead.
Matt Roberts: Hi, PK, Michael, Tracey, good morning or afternoon or evening, depending on where you are.
Peter Konieczny: Good morning.
Matt Roberts: On the potential beverage strategic considerations, now that's 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. Thank you.
Peter Konieczny: 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 spoke 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. And we should also keep in mind that, you know, some of the resin that we convert in the North American beverage business is actually tolled. 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 in dollar terms. We're still expecting that $650 million.
Operator: Your next question comes from the line of George Staphos with Bank of America. Please go ahead.
George Staphos: Hi, everyone. Thanks for all the details. 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 company 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? Thank you.
Peter Konieczny: 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 then 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 prior year. We saw some growth in the emerging markets between LatAm and Asia Pacific that was offset by just a tad of a weakness in Europe. So North America, the major source of weakness here. Both businesses have seen similar trends. So exposure, they're pretty much the same in North America to a weaker environment, and that was driven by overall consumer sentiment in a in a macroeconomic environment that drives just different buying behaviors and has sees consumers that are more value seeking.
And that's what we're seeing from our from our customers, who are pretty much broadly aligned with the volume trends that we're also see seeing. So a lot of consistency, I think, in the in the customer comments, particularly in The US. A final comment maybe, I may, a little more of a softening on the Berry side than the legacy Amcor side. But don't forget, while the trends are the same, that Berry has a higher exposure to North America and also is exposed a little more to some exposure to, I would call them, industrial end market segments like unconverted film that have seen a bit more of an impact.
Peter Konieczny: Excuse me. Excuse me. I just want to add here, Michael is saying that was the second part of the question was absolutely right, the value-based pricing. Just a quick comment on that. Do we see opportunities on for value-based pricing going forward? Absolutely. In the context of our commercial synergy work streams, we're looking at deploying best practices from both sides of the legacy businesses. And we believe that the value-based pricing that Amcor has worked on for many years in the past is an opportunity for us to look carefully at pricing across the Berry portfolio, and we're going to make use of that. Thank you.
Operator: Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.
Anthony Pettinari: Good morning. I'm wondering if you could give any more detail on the $1 billion under review that isn't the North American Bev business, understanding those are smaller businesses, from a geographic standpoint or product standpoint or just sort of strategically, what characteristics do they have?
Peter Konieczny: Yeah. Thanks, Anthony. Happy to do that. First off, we're talking about 10 businesses that make up the billion dollars. The businesses are pretty much distributed between the two legacy businesses, so you will find some of them in the legacy Amcor portfolio. You will find some of them on the legacy Berry portfolio. In terms of the criteria that we have applied, let me just help you with that a bit. And I spoke about that, and some of those are summarized, I think, on slide 10.
We said on a high level, you know, in terms of headlines, you know, do our businesses that we now have on a combined basis, do they have an attractive growth and margin portfolio? And that is obviously a consideration over the long term. And how do we like the industry structure? That would include questions like, are we exposed to large markets? Do we have room to grow? What are the barriers to entry? And there's a couple of other considerations. And then the third one was scale and leadership where we said, well, do we have significant share in that in that category, or are we large in that category as an as a combined Amcor?
Or another one would be, do we have technology that positions us well in those categories? Where businesses failed one or a combination of these criteria, we put them aside and that makes now up for the 10 plus 10 businesses plus North American beverage. The just maybe one more comment that gives you a bit of a flavor of what we're talking about. These are businesses also where you could say, you know, they have an exposure to a more cyclical end market exposure. That could be one criteria.
Or if it is consumer packaging related and therefore a little more stable, think about a single market where we have an activity, but we're participating more than winning because we're not really positioned that well in that market. And where we take a decision where we say, look, in order for us to get to a number one or number two position in that market, we would have to deploy capital, which at this point in time, we have other sources or we have other opportunities for which we would prefer. So that's how we got to the portfolio.
Operator: Your next question comes from the line of John Purtell with Macquarie. Please go ahead.
John Purtell: Good day, Peter and Michael. Hope you're well. Look, just further to an earlier question, just around any just to clarify any market share shifts to call out as well as any just in terms of, I suppose, talking to the volume performance, any market share shifts to call out? And has there been any destocking by your customers that you've seen? Obviously, that has been something that we've seen in the past.
Peter Konieczny: Yeah. Thanks, John. I think it's it's a I wanna keep it really simple here and try to help you understand market share shifts or share gains or losses, particularly given the volume performance, is not the driver. We've we are we're laser focused on that, and we're really trying to understand well where the performance comes from. It really comes down to consumer and customer demand. Share is not the issue, and neither is destocking. We have a couple of quarters ago seen a very structured and, you know, broad approach of our customer base to reduce inventory levels to more efficient lower levels.
We have literally gone through that even in the health care business, which was lagging this whole trend. We have significantly improved. I couldn't tie any of that back to destocking. Where we do see destocking maybe on single customers, I would call that more either seasonally driven stock movements, which we have seen beforehand too, or maybe they're tactical inventory movements, but nothing that we've seen beforehand.
Operator: Your next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead.
Arun Viswanathan: Yes, thanks for taking my question. Hope you guys are well. Yes, congrats on integration there getting started. Just looking at that 260 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 head achieved some headcount. So I guess, is that kind of be the main driver?
Maybe you can just discuss some of the logistics actions and some of the other integration efforts you are going to undertake to achieve that $0.10 And then I guess how does that or that $260 million and how does that proceed from there? Do you expect to be maybe at 80% in year two or what should we what should we think how the synergies kinda come in? Thanks.
Michael Casamento: Yeah. Thanks, Arun. It's Michael here. I can take that one for you. So, yep, you're quite right. We called out $260 million in our guidance as synergies, and that's right in line with what we the timing we've 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, you know, we'd expect it to '27, just to answer that question, another 40% with 20% coming in year three.
And, you know, that split of synergies in FY '26, $240 million of it is cost more cost related, and there's about $20 million that we see in financial synergies in the interest and tax line there for you. The other point to note is that the $260 million obviously is pretax. So from an EPS standpoint, it's about 9¢. So that's about the 12%, you know, baseline growth that we talked to on the you know, to get us to that bottom end of the range of 80¢. So, again, we feel really confident in that the ability to deliver that in the self-help there.
And then if I just touch on where we think it's coming from, you're you're right. We've had a we've had a good start. You know, we've we've taken out around 200 heads. We've already identified five sites for closure, and as PK mentioned, we've made good progress on procurement. So, typically, though, what you see first is the general and admin costs tend to come in first. You know, we'll get some procurement this year as well, and to a lesser extent, the footprint and growth synergies. And, you know, we're we're making really good progress on that.
So in terms of Q1, you know, I called out, we think that the phasing there is gonna be around $35 to $40 million in Q1. That's around 15% of the total for the year. Probably, as you work your way through the half, it will be more around kind of 35%. And so, you know, you'll get which is about $90 million, and then you'll get the balance in the back half of the year, so as we as we exit strongly in Q4.
And look, of the $240 million cost that I called out, you know, I'd I'd say, you know, that's gonna be largely G&A and procurement with a little bit of a little bit of operational improvement and a smaller growth synergy included in that.
Operator: Your next question comes from the line of Ramon Lazar with Jefferies. Please go ahead.
Ramon Lazar: Good morning, Phil sorry, good morning, PK and Michael. A quick one from 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?
Peter Konieczny: Yeah. Ramon, I'll be happy to do that. Let me start and then quantification, I'll I'll hand it off to Michael. Look. I'm gonna say it very loud and clear. We're not happy with the performance of the North American beverage business in the fourth quarter. If I if I'd summarize very simply what actually has happened, The business was very focused, rightly so, on taking cost out, particularly in the first half of the year in order to support earnings in an environment of lower volumes. And then as they then were approaching what we were approaching the fourth quarter, which in that business seasonally is the highest volume quarter, we ran into service issues for our customers.
And that had to do with the out of region supplies, drove higher waste levels, drove higher labor cost in the business. And that is and that is what happened. We're not proud of it. Flexing our capacities with volumes is something that we're very, very familiar with. In that case, we have, we have obviously done too much of that, but we're gonna get that fixed. Now in terms of quantification, Michael, do you wanna take that?
Michael Casamento: Yeah. No. Look. I think, you know, just to put a bit of color around that, I mean, you can see from the results that year on year, if you exclude the Berry Cap impact because we know that was in the prior year, that was about $7 million. You know, if I take that out, the business was down in North America beverage primarily around $20 million. So, you know, it was a reasonable, decline versus the prior year. And to PK's point, you know, we're not happy with that. It was really a combination of, you know, the labor. We'd started to build labor.
And, you know, as we said in there's a couple of big plants where the volumes did increase, but we just we just couldn't operationally manage those through. So we incurred some higher labor, less fixed cost fixed cost absorption, and, you know, we had some out of region freight to be able to service customers. So that really drove the decline for the higher cost base versus the prior year. We're on it. PK has touched on that. We're still expecting some elevated cost in Q1, and we'll drive improvement from there.
Operator: Your next question comes from the line of Michael Roxland with Truist Securities. Please go ahead.
Michael Roxland: Yes. Thank you, PK, Michael, Tracey, Damon and Gusman for taking the question. And congrats on closing the deal on all the progress. You're guiding to adjusted EPS of approximately, I guess, $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 impact negatively impact 1Q. How should we think about the impact that North America and Ben have had on that EPS forecast through the balance of fiscal 2026? Thank you.
Michael Casamento: Yes. Thanks, Mike. I can start there. Perhaps I'll take that for you. So look, we as I said in my remarks, from a demand environment, we're not anticipating any real, you know, improvement in the demand environment. We're still expecting volumes to be pretty subdued. So, you know, within we're giving you a guidance range of 80 to 83. I think, you know, probably the underlying principle is that volumes are gonna be flat, so you're not gonna see much revenue growth on that front. And, obviously, you know, if we see a better outcome than that, then that's one of those areas that helps us get to the top end of the range.
If it was worse than that, you know, we obviously can take some cost out and help manage that. So that's a way to offset that. I think as I as I called out, I think from a beverage North America beverage standpoint, we will still see some elevated costs in the first quarter. You know, that said, the underlying business again in Q1, and I touched on that, you know, we are expecting volumes to be perhaps similar to Q4, maybe slightly better, but not nothing materially different. So we, you know, we will manage the cost base, you know, with a strong focus in Q1, but we also get the synergy delivery.
So, you know, we are expecting that $35 million to $40 million in synergies come through to about 8% EPS growth.
Operator: Your next question comes from the line of Keith Chau with MST Financial. Please go ahead.
Keith Chau: Hi, PK, Michael and team. A question relating to the North American beverages business again. So sorry for laboring 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, you know, there is a lot of sight to improving business performance?
And, you know, clearly, you've mentioned a few aspects already, but, you know, if you think about the fail-safe measures, the day to days, you know, what are the parameters that you're looking at before divestment, please?
Peter Konieczny: Yeah, Keith. It's a it's a good question. And I will start out by saying, you know, these two things are actually, you should try to keep them apart. The operating performance of the business in a short period of time should not drive your strategic assessment of the portfolio. And so these are two things. They're difficult to keep apart when you have the situation that we just had, Right? You make a strategic assessment and you see an operating performance of the business, which is not great. And, but, you know, the theory what the science would say, you should keep that apart.
Now we the way that we look at this in the current situation is we're gonna we're gonna focus, and I said that in my prepared comments, we're gonna focus on stabilizing the business, and that will probably take a couple of quarters for us to get there. And I think that's the right thing to do. We need to stabilize this business before we can realistically think about bringing this business to the market. And it will not take forever, but it will take a bit of time. Once that is done, we will go forward and we will very quickly assess the alternatives that we have for this business.
And this is something where generally for all of the businesses, we will have to look at a couple of stakeholders that we need to keep in mind. First and foremost, I will say it's actually the customer. We will do nothing here across all of those 10 plus one businesses, 10 plus the North American Beverage business. We'll do that together with our customers because the customers will have to be supportive of everything that we do. And then obviously, our owners and the shareholders and that will be a combination of a value consideration and a speed consideration. Because once you identify businesses that are non-core, you actually want to make progress against those.
So we have that also on the agenda. There's no question. And I think that covers it from my side. Thank you.
Operator: Your next question comes from the line of Nathan Reilly with UBS. Please go ahead.
Nathan Reilly: Thanks. Pete, just a quick, I'm just curious, how are you thinking about the timing of potential growth investment or even share buybacks? Just 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 that you're thinking about maybe target leverage in terms of those opportunities.
Michael Casamento: Yes. I can take that one, Nathan, if you like. It's Michael here. Yeah. Thanks for the question. Yeah. Look. I mean, we're committed to the investment grade credit rating, and, you know, we've said that as part of this transaction all the way along. You know, for us, that means, you know, a leverage range of two and a half to three times. And, you know, as we talked about today, we're outside that range, you know, which is in line with our expectations at this point in time. So, you know, the first thing we need to do is, you know, deliver and get that get that leverage back into that range. So that will be the focus.
And, obviously, the strong cash flow that we're generating in FY 2026 contributes to that, and you see a really good delevering down, you know, from the 3.5 times we're at today, you know, down more into that 3.1, 3.2 times. And as I said in my remarks, you know, that doesn't include any proceeds from portfolio optimization. So if we were to get some proceeds there, we would first and foremost put that to delevering further, so paying down debt. And then once we're comfortably in that two and a half to three times range, we'll we'll then start to think more about the capital allocation, particularly around share buybacks.
But, you know, you know as well as others that industry, you know, at times comes up with there will be some M&A opportunities out there. You know, that still remains on the agenda, obviously, because, you know, typically, you know, we've obviously got to get through a fair part of the integration to start with. But as we work our way through that, you know, they're they're typically bolt-on and small types of acquisitions. So, we wouldn't discount those. But clearly, first and foremost, we're focused on delivering and getting the balance sheet back into that 2.5 to three times range.
Operator: Your next question comes from the line of Brook Campbell-Crawford with Biren, Joey. Please go ahead.
Brook Campbell-Crawford: Yes, thanks for taking my question. Just one on Berry and accretion. I guess back in the last result call, we talked about being $0.01 per share accretive in the June. So just how should we think about that for FY 2026, I guess, accretion from the deal before synergies? And can you comment on the magnitude of the EBIT performance, I guess, probably decline in Berry in May and June 2025 versus the PCP banks?
Michael Casamento: Yes. I can start on that one, Brook. Thanks. Yes. Look, the Berry combination did have some contribution to our EPS in the quarter. It was, call it, you know, half to 1¢, which is what we what we kind of referred to back in April. And it's always gonna be a factor of the income versus the share count and how that flows through. You know, what I can tell you is the 71 the 71.2¢ we reported, you know, that's that's pretty If you look at it on a combined basis, it's a pretty similar number. So you only you know, that's what that's where we start from.
And as we look forward, we feel pretty good about the 12%, you know, base 12 to 17% EPS growth that we're guiding to next year. A significant part of that is the accretion from the synergy delivery. So, you know, we feel pretty good about where that's coming from and the contribution there. In terms of the EBIT performance of Berry or the performance generally, it was pretty similar to what Amcor saw. So you heard, PK touch on the volume, and notwithstanding, Berry doesn't have an exposure to the North American beverage business or, doesn't. But outside of that, you know, volumes were pretty similar to Amcor, down slightly, normally in North America.
You know, at the net income line, we are off about four or 5%, and that was you know, I think that's that's a good proxy for where Berry was at.
Operator: Your next question comes from the line of Jakob Cakarnis with Jarden Australia. Go ahead.
Jakob Cakarnis: Hi, Peter. Hi, Michael. 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 says it's an inventory step up amortization. It's on note two. Its value is $133 million. Could you just step me through what that is, please? Obviously, there's only a modest period for that included in fiscal 2025. Can you just get me through how that might look also in '26, please?
Michael Casamento: Yeah. Look. That's just a said and done purchase price accounting adjustment. That's all there is. It's for two months. It's all done. There is there's nothing further to come in '26. I guess the point I would say as well is just remember that the opening balance sheet and the numbers that we put here, I mean, it's a the PPA is a which price accounting is an estimate. You know, it's based on the information we have at time, and, obviously, that, you know, that does get updated, or we can update that in the first twelve months.
So, you know, I think all that does is brings the that particular entry you're referring to really just brings the inventory in line with market value, And that's a pretty standard adjustment that you're seeing, particularly when you've got a deal of this size.
Operator: And that concludes our question and answer session. And I will now turn the conference back over to Peter for closing comments.
Peter Konieczny: Well, thank you, operator, and thank you, everybody, for joining us. I wanna keep it maybe at the end really simple here. We're pretty confident. I think we're moving pretty fast. We should not forget that, you know, we closed this acquisition in five months. We're a hundred days into it now. Feel really good about the synergies. We've got some challenges that we're not proud of in North American Beverage, but we're responding to it. And we're pretty confident about 12% of growth in fiscal 2026. So look forward to the opportunity sitting down with you or many of you over the course of the quarter. Thank you very much. And that concludes the call.
Operator: Ladies and gentlemen, thank you for your participation in today's call, and you may now disconnect.