Amcor 10-Q 2022-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-38932

AMCOR PLC

(Exact name of Registrant as specified in its charter)

83 Tower Road North

Warmley, Bristol BS30 8XP

United Kingdom

(Address of principal executive offices)

Registrant’s telephone number, including area code: +44 117 9753200

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2022, the registrant had 1,489,019,556 ordinary shares, $0.01 par value, outstanding.

Amcor plc

Quarterly Report on Form 10-Q

Table of Contents

Cautionary Statement Regarding Forward-Looking Statements

Unless otherwise indicated, references to "Amcor," the "Company," "we," "our," and "us" in this Quarterly Report on Form 10-Q refer to Amcor plc and its consolidated subsidiaries.

This Quarterly Report on Form 10-Q contains certain statements that are "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified with words like "believe," "expect," "target," "project," "may," "could," "would," "approximately," "possible," "will," "should," "intend," "plan," "anticipate," "commit," "estimate," "potential," "ambitions," "outlook," or "continue," the negative of these words, other terms of similar meaning, or the use of future dates. Such statements are based on the current expectations of the management of Amcor and are qualified by the inherent risks and uncertainties surrounding future expectations generally. Actual results could differ materially from those currently anticipated due to a number of risks and uncertainties. None of Amcor or any of its respective directors, executive officers, or advisors, provide any representation, assurance, or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Risks and uncertainties that could cause actual results to differ from expectations include, but are not limited to:

• Changes in consumer demand patterns and customer requirements in numerous industries;

• the loss of key customers, a reduction in their production requirements, or consolidation among key customers;

• significant competition in the industries and regions in which we operate;

• the inability to expand our current business effectively through either organic growth, including by product innovation, or acquisitions;

• challenging current and future global economic conditions, including inflation and supply chain disruptions;

• impact of operating internationally, including negative impacts from the Russia-Ukraine conflict;

• price fluctuations or shortages in the availability of raw materials, energy and other inputs, which could adversely affect our business;

• production, supply, and other commercial risks, including counterparty credit risks, which may be exacerbated in times of economic volatility;

• global health outbreaks, including the Coronavirus pandemic ("COVID-19");

• an inability to attract and retain key personnel;

• costs and liabilities related to current and future environment, health and safety laws and regulations;

• labor disputes;

• risks related to climate change;

• failures or disruptions in information technology systems;

• cybersecurity risks, which could disrupt our operations or risk of loss of our sensitive business information;

• a significant increase in our indebtedness or a downgrade in our credit rating could reduce our operating flexibility and increase our borrowing costs and negatively affect our financial condition and results of operations;

• foreign exchange rate risk;

• rising interest rates that increase our borrowing costs on our variable rate indebtedness and could have other negative impacts;

• a significant write-down of goodwill and/or other intangible assets;

• failure to maintain an effective system of internal control over financial reporting;

• an inability of our insurance policies, including our use of a captive insurance company, to provide adequate protection against all of the risks we face;

• an inability to defend our intellectual property rights or intellectual property infringement claims against us;

• litigation, including product liability claims, or regulatory developments;

• increasing scrutiny and changing expectations with respect to our Environmental, Social, and Governance ("ESG") practices resulting in additional costs or exposure to additional risks;

• changing government regulations in environmental, health, and safety matters; and

• changes in tax laws or changes in our geographic mix of earnings.

These risks and uncertainties are supplemented by those identified from time to time in our filings with the Securities and Exchange Commission, including without limitation, those described under Part I, "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, as updated by our quarterly reports on Form 10-Q. You can obtain copies of Amcor’s filings with the SEC for free at the SEC’s website (www.sec.gov). Forward-looking statements included herein are made only as of the date hereof and Amcor does not undertake any obligation to update any forward-looking statements, or any other information in this communication, as a result of new information, future developments or otherwise, or to correct any inaccuracies or omissions in them which become apparent, except as expressly required by law. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.

Part I - Financial Information

Amcor plc and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Amcor plc and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Amcor plc and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

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Management’s Discussion and Analysis ("MD&A") should be read in conjunction with our Form 10-K for fiscal year 2022 filed with the U.S Securities and Exchange Commission (the "SEC") on August 18, 2022, together with the unaudited condensed consolidated financial statements and accompanying notes included in Part 1, Item 1 of this Form 10-Q. Throughout the MD&A, amounts and percentages may not recalculate due to rounding.

Summary of Financial Results

Overview

Amcor is a global leader in developing and producing responsible packaging for food, beverage, pharmaceutical, medical, home and personal-care, and other products. We work with leading companies around the world to protect their products and the people who rely on them, differentiate brands, and improve supply chains through a range of flexible and rigid packaging, specialty cartons, closures, and services. We are focused on making packaging that is increasingly light-weighted, recyclable and reusable, and made using an increasing amount of recycled content. During fiscal year 2022, Amcor generated $14.5 billion in net sales.

Significant Items Affecting the Periods Presented

Raw Material, Inflation, and Supply Chain Trends

During the first quarter of fiscal year 2023, we continued to experience intermittent supply shortages and price volatility of certain resins and raw materials as a result of market dynamics and higher rates of inflation impacting energy, fuel, and labor costs. In addition, higher inflation, especially in Europe and the United States, has led central banks to rapidly raise interest rates to dampen inflation which results in higher interest expense on our variable rate debt. The underlying causes for the continued volatility can be attributed to a variety of factors, including the ongoing impacts of the COVID-19 pandemic resulting in labor shortages and transportation constraints, energy shortages and the ongoing impacts of macroeconomic and geopolitical conditions which are tied to the Russia-Ukraine conflict. We will continue to work closely with our suppliers and customers, leveraging our global capabilities and expertise to work through supply and other resulting issues. In addition, we are focused on driving costs out of our business in this challenging environment and recovering higher raw material costs to help mitigate inflation. However, there could be a time lag between recognizing the benefit of our mitigating actions and when the inflation occurs and there is no assurance that our mitigating measures will be able to fully mitigate the impact of ongoing inflation.

Impact of COVID-19

We continue to monitor the impact of the ongoing 2019 Novel Coronavirus ("COVID-19") pandemic on all aspects of our business. The COVID-19 pandemic has resulted in intermittent regional government restrictions on the movement of people, goods, and non-essential services resulting in a period of historic uncertainty and challenges. We remain focused on our commitment to the health and safety of our employees as our first priority. We expect to continue to evaluate our response and related precautions until the COVID-19 pandemic has been fully resolved as a public health crisis.

Most of the countries in which we operate currently have little to no COVID-19 related restrictions, with the exception of China, which continues to initiate lockdowns related to the pandemic. These lockdowns have impacted demand and may continue to impact demand for our products and have also led to supply chain disruptions and other challenges. Throughout the COVID-19 pandemic, our facilities have largely been exempt from government mandated closure orders and while governmental measures may be modified, we expect that our facilities will remain operational given the essential products we supply. However, despite our best efforts to contain the impact in our facilities, it remains possible that significant disruptions could occur as a result of the pandemic, including temporary closures of our facilities due to outbreaks of the virus among our workforce or government mandates.

We continue to believe we are well-positioned to meet the challenges of the ongoing COVID-19 pandemic. However, we cannot reasonably estimate the duration and severity of this pandemic or its ultimate impact on the global economy and our operations and financial results. The ultimate near-term impact of the pandemic on our business will depend on the extent and nature of any future disruptions across the supply chain, the implementation of further social distancing measures and other government-imposed restrictions, as well as the nature and pace of macroeconomic recovery in key global economies.

Russia and Ukraine Conflict

Russia's invasion of Ukraine that began in February 2022 continues as of the date of the filing of this quarterly report. In advance of the invasion, we proactively suspended operations at our small manufacturing site in Ukraine. We also operate three manufacturing facilities in Russia. In the fourth quarter of fiscal year 2022, after a thorough review of our strategic options, we committed to sell our Russian operations, which resulted in a non-cash $90 million impairment charge. During the first quarter of fiscal year 2023, we received indicative bids for our Russian operations which are subject to due diligence. Based on these indicative bids, the fair value less costs to sell our Russian operations has been updated, which did not result in a

change to the previously recognized impairment. We continue to expect the sale of our Russian operations will be completed in fiscal year 2023.

Since our decision in March 2022 to scale back our Russian operations, we have remained committed to continuing to support our Russian and Ukrainian employees and customers. We are proactively taking steps to mitigate the financial impact of exiting our Russian operations, including adjusting our European footprint to reallocate and consolidate volumes from Russia and Ukraine to leverage utilization and deliver enhanced efficiencies across Central and Western Europe, as well as taking actions to restructure our regional cost base. We expect approximately $30 million in additional restructuring and other costs in fiscal year 2023 related to our exit decision.

For further information, refer to Note 3, "Held for Sale," and Note 5, "Restructuring" of "Part I, Item 1, Notes to Condensed Consolidated Financial Statements."

Highly Inflationary Accounting

We have subsidiaries in Argentina that historically had a functional currency of the Argentine Peso. As of June 30, 2018, the Argentine economy has been designated as highly inflationary for accounting purposes. Accordingly, beginning July 1, 2018, we began reporting the financial results of our Argentine subsidiaries with a functional currency of the Argentine Peso at the functional currency of the parent, which is the U.S. dollar. Highly inflationary accounting in the three months ended September 30, 2022 and 2021 resulted in a negative impact of $8 million and $2 million, respectively, in foreign currency transaction losses that was reflected in the unaudited condensed consolidated statements of income.

Results of Operations - Three Months Ended September 30, 2022

Consolidated Results of Operations

Net sales increased by $292 million, or 9%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Excluding the pass-through of raw material costs of $398 million, negative currency impacts of $207 million, and negative net impact of acquisitions, disposed, and ceased operations of $10 million, the increase in net sales for the three months ended September 30, 2022 was $111 million, or 3%, driven by favorable price/mix of 4% and unfavorable volumes of 1%.

Net income attributable to Amcor plc increased by $30 million, or 15%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, mainly as a result of increased gross profit of $18 million generated by net sales improvement, and lower selling, general, and administrative (“SG&A”) and other expenses of $28 million, partially offset by higher interest expense of $19 million.

Diluted earnings per share ("Diluted EPS") increased by $0.024, or by 18%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, with the net income attributable to ordinary shareholders of Amcor plc increasing by 15% and the diluted weighted average number of shares outstanding decreasing by 3%. The decrease in the diluted weighted-average number of shares outstanding was due to repurchase of shares under announced share buyback programs.

Segment Results of Operations

Flexibles Segment

The Flexibles reportable segment develops and supplies flexible packaging globally.

Net sales including intersegment sales increased by $145 million, or by 6%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Excluding the pass-through of raw material costs of $267 million, negative currency impacts of $201 million, and negative net impact of acquisitions, disposed, and ceased operations of $10 million, the increase in net sales, including intersegment sales, for the three months ended September 30, 2022, was $89 million, or 3%, driven by favorable price/mix of 4%, and unfavorable volumes of 1%.

Adjusted earnings before interest and tax ("Adjusted EBIT") increased by $14 million, or by 4%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Excluding negative currency impacts of $21 million and the negative net impact of acquisitions, disposed, and ceased operations of $2 million, the increase in Adjusted EBIT for the three months ended September 30, 2022, was $37 million, or 11%, driven by favorable price/mix of 19%, partially offset by unfavorable SG&A and other costs of (4%), unfavorable plant costs of (3%), and unfavorable volumes of (1%).

Rigid Packaging Segment

The Rigid Packaging reportable segment manufactures rigid packaging containers and related products.

Net sales increased by $147 million, or by 19%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Excluding the pass-through of raw material costs of $132 million and negative currency impacts of $6 million, the increase in net sales for the three months ended September 30, 2022 was $21 million, or 3%, driven by favorable volumes of 1% and favorable price/mix of 2%.

Adjusted EBIT increased by $4 million, or by 6%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Excluding negative currency impacts of $1 million, the increase in Adjusted EBIT for

the three months ended September 30, 2022, was $5 million, or 7%, driven primarily by favorable volumes of 8%, favorable

price/mix of 34%, partially offset by unfavorable SG&A, and other costs of (6%) and unfavorable plant costs of (29%) driven

primarily by inflation on operating costs including higher energy and labor costs.

Consolidated Gross Profit

Gross profit increased by $18 million, or by 3%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase was primarily driven by the increase in net sales of 3% referred to above. Gross profit as a percentage of sales decreased to 18.0% for the three months ended September 30, 2022, primarily due to the impact on the calculation from the pass through of higher raw material costs during the current fiscal quarter.

Consolidated Selling, General, And Administrative Expenses

Selling, general, and administrative expenses decreased by $11 million, or by 4%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily driven by positive currency impacts during the current fiscal quarter.

Consolidated Other Income/(Expenses), Net

Other income/(expenses), net fluctuated by $10 million, or by 125%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, driven by the non-recurrence of property and related business losses primarily associated with the destruction of our Durban, South Africa, facility in July 2021.

Consolidated Interest Expense

Interest expense increased by $19 million, or by 48%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, driven by increased interest rates on our variable rate debt.

Consolidated Income Tax Expense

The provision for income taxes for the three months ended September 30, 2022 and 2021 is based on our estimated annual effective tax rate for the respective fiscal years, and is applied on income before income taxes, and adjusted for specific items that are required to be recognized in the period in which they are incurred.

The effective tax rate for the three months ended September 30, 2022 decreased by 3.8 percentage points compared to the three months ended September 30, 2021, primarily due to differences in the income mix, including higher and non-deductible expenses that did not recur in the current period, and the difference in magnitude of discrete events in both periods.

Presentation of Non-GAAP Information

This Quarterly Report on Form 10-Q refers to non-GAAP financial measures: adjusted earnings before interest and taxes ("Adjusted EBIT"), earnings before interest and tax ("EBIT"), adjusted net income, and net debt. Such measures have not been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of significant tax reforms, certain amounts related to the effect of changes in currency exchange rates, acquisitions, and restructuring, including employee-related costs, equipment relocation costs, accelerated depreciation, and the write-down of equipment. These measures also exclude gains or losses on sales of significant property and divestitures, significant property and other impairments, net of insurance recovery, certain litigation matters, significant pension settlements, impairments in goodwill and equity method investments, and certain acquisition-related expenses, including transaction expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, order backlog, intangible amortization, changes in the fair value of deferred acquisition payments, and impacts related to the Russia-Ukraine conflict.

This adjusted information should not be construed as an alternative to results determined in accordance with U.S. GAAP. We use the non-GAAP measures to evaluate operating performance and believe that these non-GAAP measures are useful to enable investors and other external parties to perform comparisons of our current and historical performance.

A reconciliation of reported net income attributable to Amcor plc to EBIT, Adjusted EBIT and Adjusted net income for the three months ended September 30, 2022 and 2021 is as follows:

(1)Material restructuring programs includes restructuring and related expenses for the 2019 Bemis Integration Plan for the three months ended September 30, 2021.

(2)Material acquisition costs and other includes costs / releases of accruals associated with the Bemis transaction.

(3)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from past acquisitions.

(4)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.

(5)Property and other losses, net includes property and related business losses primarily associated with the destruction of our Durban, South Africa, facility during general civil unrest in July 2021, net of insurance recovery.

(6)Russia-Ukraine conflict impacts include incremental costs incurred in connection with the conflict.

(7)Net tax impact on items (1) through (6) above.

Reconciliation of Net Debt

A reconciliation of total debt to net debt at September 30, 2022 and June 30, 2022 is as follows:

Supplemental Guarantor Information

Amcor plc, along with certain wholly owned subsidiary guarantors, guarantee the following senior notes issued by the wholly owned subsidiaries, Amcor Flexibles North America, Inc. and Amcor UK Finance plc.

• $500 million, 4.000%, Guaranteed Senior Notes due 2025 of Amcor Flexibles North America, Inc.

• $300 million, 3.100%, Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.

• $600 million, 3.625%, Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.

• $500 million, 4.500%, Guaranteed Senior Notes due 2028 of Amcor Flexibles North America, Inc.

• $500 million, 2.630%, Guaranteed Senior Notes due 2030 of Amcor Flexibles North America, Inc.

• $800 million, 2.690%, Guaranteed Senior Notes due 2031 of Amcor Flexibles North America, Inc.

• €500 million, 1.125%, Guaranteed Senior Notes due 2027 of Amcor UK Finance plc

The six notes issued by Amcor Flexibles North America, Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Finance (USA), Inc., and Amcor UK Finance plc. The note issued by Amcor UK Finance plc is guaranteed by its parent entity, Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Flexibles North America, Inc., and Amcor Finance (USA), Inc.

All guarantors fully, unconditionally, and irrevocably guarantee, on a joint and several basis, to each holder of the notes, the due and punctual payment of the principal of, and any premium and interest on, such note and all other amounts payable, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of the notes and related indenture. The obligations of the applicable guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, or similar laws) under applicable law. The guarantees will be unsecured and unsubordinated obligations of the guarantors and will rank equally with all existing and future unsecured and unsubordinated debt of each guarantor. None of our other subsidiaries guarantee such notes. The issuers and guarantors conduct large parts of their operations through other subsidiaries of Amcor plc.

Amcor Flexibles North America, Inc. is incorporated in Missouri in the United States, Amcor UK Finance plc is incorporated in England and Wales, United Kingdom, and the guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the issuers and guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States, or English insolvency law, as the case may be, if either issuer or any guarantor defaults on its obligations under the applicable Notes or Guarantees, respectively.

Set forth below is the summarized financial information of the combined Obligor Group made up of Amcor plc (as parent guarantor), Amcor Flexibles North America, Inc. and Amcor UK Finance plc (as subsidiary issuers of the notes and guarantors of each other’s notes), and Amcor Finance (USA), Inc. and Amcor Pty Ltd (as the remaining subsidiary guarantors).

Basis of Preparation

The following summarized financial information is presented for the parent, issuer, and guarantor subsidiaries ("Obligor Group") on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor.

This information is not intended to present the financial position or results of operations of the combined group of companies in accordance with U.S. GAAP.

Statement of Income for Obligor Group

(1)Includes $514 million net expense from internal reorganization.

Balance Sheets for Obligor Group

New Accounting Pronouncements

Refer to Note 2, "New Accounting Guidance," in "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements."

Critical Accounting Estimates and Judgments

Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Our estimates and judgments are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. These critical accounting estimates are discussed in detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Judgments” in our Annual Report on Form 10-K for the year ended June 30, 2022. There have been no material changes in critical accounting estimates and judgments as of September 30, 2022 from those described in our Annual Report on Form 10-K for the year ended June 30, 2022.

Liquidity and Capital Resources

We finance our business primarily through cash flows provided by operating activities, borrowings from banks, and proceeds from issuances of debt and equity. We periodically review our capital structure and liquidity position in light of market conditions, expected future cash flows, potential funding requirements for debt refinancing, capital expenditures and acquisitions, the cost of capital, sensitivity analyses reflecting downside scenarios, the impact on our financial metrics and credit ratings, and our ease of access to funding sources.

The COVID-19 pandemic and geopolitical tensions have not materially impacted our liquidity position, current and expected cash flows from operating activities, or available cash. We believe that our cash flows provided by operating activities, together with borrowings available under our credit facilities and access to the commercial paper market, backstopped by our bank debt facilities, will continue to provide sufficient liquidity to fund our operations, capital expenditures, and other commitments, including dividends and purchases of our ordinary shares and CHESS Depositary Instruments under authorized share repurchase programs, into the foreseeable future.

Overview

Cash Flow Overview

Net Cash Used in Operating Activities

Net cash used in operating activities increased by $148 million, or by 133%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase in cash outflow is primarily driven by higher inventory levels to mitigate variability of raw material supply over the last twelve months along with the timing of higher raw material costs on working capital.

Net Cash Used in Investing Activities

Net cash used in investing activities increased by $95 million, or by 66%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase in cash outflow was primarily due to the acquisition of DGPack s.r.o. and additional investments in affiliated companies.

Net Cash Provided by Financing Activities

Net cash provided by financing activities increased by $259 million, or by 387%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase is primarily due to higher net debt drawdowns compared to the prior period.

Net Debt

We borrow from financial institutions and debt investors in the form of bank overdrafts, bank loans, corporate bonds, unsecured notes, and commercial paper. We have a mixture of fixed and floating interest rates and use interest rate swaps to provide further flexibility in managing the interest cost of borrowings. At the end of October 2022, we entered into interest rate swap contracts for a total notional amount of $1.25 billion. Under the terms of the contracts, we will pay a weighted average fixed rate of interest of 4.53% and receive a variable rate of interest, based on compound overnight SOFR, for the period from November 1, 2022, through June 30, 2023, settled monthly. We expect that the interest rate swap contracts will effectively hedge the SOFR component of $1.25 billion of ongoing USD commercial paper issuances at 4.53%.

Short-term debt consists of bank debt with a duration of less than 12 months and bank overdrafts which are classified as current due to the short-term nature of the borrowings, except where we have the ability and intent to refinance and as such extend the debt beyond 12 months. The current portion of long-term debt consists of debt amounts repayable within a year after the balance sheet date.

Our primary bank debt facilities and notes are unsecured and subject to negative pledge arrangements limiting the amount of secured indebtedness we can incur to 10.0% of our total tangible assets, subject to some exceptions and variations by facility. In addition, the covenants of the bank debt facilities require us to maintain a leverage ratio not higher than 3.9 times. The negative pledge arrangements and the financial covenants are defined in the related debt agreements. As of September 30, 2022, we were in compliance with all applicable covenants under our bank debt facilities.

Our net debt as of September 30, 2022 and June 30, 2022 was $6.4 billion and $5.7 billion, respectively.

Available Financing

As of September 30, 2022, we had undrawn credit facilities available in the amount of $0.8 billion. Our senior facilities are available to fund working capital, growth capital expenditures, and refinancing obligations and are provided to us by two bank syndicates. These facilities mature in April 2025 and April 2027, respectively, and the revolving tranches have two 12-month options available to management to extend the maturity date. Subject to certain conditions, we can request the total commitment level under each agreement to be increased by up to $500 million.

As of September 30, 2022, the revolving senior bank debt facilities had an aggregate limit of $3.8 billion, of which $3.0 billion had been drawn (inclusive of amounts drawn under commercial paper programs reducing the overall balance of available senior facilities).

Dividend Payments

We declared and paid a $0.12 cash dividend per ordinary share during the first fiscal quarter which ended September 30, 2022.

Credit Rating

Our capital structure and financial practices have earned us investment grade credit ratings from two internationally recognized credit rating agencies. These investment grade credit ratings are important to our ability to issue debt at favorable rates of interest, for various terms, and from a diverse range of markets that are highly liquid, including European and U.S. debt capital markets, and from global financial institutions.

Share Repurchases

On August 17, 2022, our Board of Directors approved a $400 million buyback of ordinary shares and/or CHESS Depositary Instruments ("CDIs"). During the three months ended September 30, 2022, no shares were repurchased under this program.

We had cash outflows of $202 million and $131 million for the purchase of our shares in the open market and using forwards contracts to purchase our own equity during the three months ended September 30, 2022 and 2021, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of September 30, 2022, June 30, 2022, and September 30, 2021, we held treasury shares at cost of $49 million, $18 million, and $50 million, representing 4 million, 2 million, and 4 million shares, respectively.

There have been no material changes in our market risk during the three months ended September 30, 2022. For additional information, refer to Note 7, "Fair Value Measurements," and Note 8, "Derivative Instruments," in the notes to our unaudited condensed consolidated financial statements, and to "Item 7A. - Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the year ended June 30, 2022.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the first quarter of fiscal year 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

The material set forth in Note 14, "Contingencies and Legal Proceedings," in "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements" is incorporated herein by reference.

There have been no material changes from the risk factors contained in "Item 1A. - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

Share repurchase activity during the three months ended September 30, 2022 was as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts, which are expressed in U.S. dollars):

(1) Includes shares purchased on the open market to satisfy the vesting and exercises of share-based compensation awards.

(2) Average price paid per share excludes costs associated with the repurchase.

(3) On August 17, 2022, our Board of Directors approved a buyback of $400 million of ordinary shares and/or CHESS Depositary Instruments ("CDIs") during the following twelve months. The timing, volume, and nature of share repurchases may be amended, suspended, or discontinued at any time.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Not applicable.

The documents in the accompanying Exhibits Index are filed, furnished, or incorporated by reference as part of this Quarterly Report on Form 10-Q, and such Exhibits Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.