Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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


	Three Months Ended March 31,								Nine Months Ended March 31,
($ in millions)	2023				2022				2023				2022
Net sales	$	3,667	100.0	%	$	3,708	100.0	%	$	11,021	100.0	%	$	10,635	100.0	%
Cost of sales	(2,994)		(81.6	%)	(2,977)		(80.3	%)	(9,018)		(81.8	%)	(8,609)		(80.9	%)

Gross profit	673		18.4	%	731		19.7	%	2,003		18.2	%	2,026		19.1	%

Operating expenses:
Selling, general, and administrative expenses	(317)		(8.6	%)	(326)		(8.8	%)	(917)		(8.3	%)	(942)		(8.9	%)
Research and development expenses	(27)		(0.7	%)	(24)		(0.6	%)	(76)		(0.7	%)	(72)		(0.7	%)
Restructuring and other related activities, net	(50)		(1.4	%)	(9)		(0.2	%)	162		1.5	%	(27)		(0.3	%)
Other income/(expenses), net	3		0.1	%	(3)		(0.1	%)	11		0.1	%	2		—	%

Operating income	282		7.7	%	369		10.0	%	1,183		10.7	%	987		9.3	%

Interest income	15		0.4	%	5		0.1	%	35		0.3	%	15		0.1	%
Interest expense	(86)		(2.3	%)	(36)		(1.0	%)	(224)		(2.0	%)	(115)		(1.1	%)
Other non-operating income, net	2		0.1	%	5		0.1	%	5		—	%	12		0.1	%

Income before income taxes	213		5.8	%	343		9.3	%	999		9.1	%	899		8.5	%

Income tax expense	(34)		(0.9	%)	(72)		(1.9	%)	(125)		(1.1	%)	(196)		(1.8	%)


Net income	$	179	4.9	%	$	271	7.3	%	$	874	7.9	%	$	703	6.6	%

Net income attributable to non-controlling interests	(2)		(0.1	%)	(2)		(0.1	%)	(6)		(0.1	%)	(7)		(0.1	%)

Net income attributable to Amcor plc	$	177	4.8	%	$	269	7.3	%	$	868	7.9	%	$	696	6.5	%

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 fiscal year 2023, we have 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 regional impacts of the COVID-19 pandemic which has largely abated in the third quarter of fiscal year 2023, 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 chain disruptions 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

There are currently no significant COVID-19 related restrictions on our business, with China relaxing controls and eliminating lockdowns in December 2022. Lockdowns and related impacts, including the unwinding of lockdowns, has impacted demand for our products in China in fiscal year 2023 and may continue to impact demand for our products and lead 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 any continuing challenges of the COVID-19 pandemic and currently do not expect a material adverse impact on our business and financial results. However, 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 / 2023 Restructuring Plan

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 operated three manufacturing facilities in Russia ("Russian business") until their sale on December 23, 2022, for net cash proceeds of $365 million. In addition, we repatriated approximately $65 million in cash held in Russia as part of the transaction. We recorded a pre-tax net gain on sale of $215 million. The carrying value of the Russian business had previously been impaired by $90 million in the quarter ended June 30, 2022.

On February 7, 2023, we announced that we expect to invest $110 million to $130 million of the sale proceeds from the Russian business in various cost savings initiatives to partly offset divested earnings from the Russian business (the "2023 Restructuring Plan" or the "Plan"). Of the remaining cash received, we plan to repurchase up to $100 million in additional shares and use the balance to reduce debt.

In the third quarter of fiscal year 2023, we initiated restructuring and related projects with an expected cost of approximately $95 million and approximately $50 million is expected to result in net cash expenditures. As part of this Plan, we have incurred $37 million in employee-related expenses, $1 million in fixed asset related expenses, $2 million in other restructuring expenses, and $2 million in restructuring related expenses. To date, the Plan has resulted in approximately $7 million in cash outflows. We expect approximately $17 million in cash outflows from projects initiated in the third fiscal quarter during the balance of fiscal year 2023. We continue to evaluate different options to offset divested earnings from the Russian business across our global footprint and expect to disclose the total program cost at the end of fiscal year 2023. Management expects to realize an annualized pre-tax benefit of approximately 30% per year on net cash employed in the Plan from structural cost reductions by the end of fiscal year 2025.

The conflict between Russia and Ukraine has negatively impacted the global economy and has the potential to result in continued supply chain disruptions and significant inflationary pressure on raw material prices and the cost and supply of other resources (such as energy and natural gas).

For further information, refer to Note 4, "Held for Sale," Note 5, "Acquisitions and Disposals," and " Note 6, "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 March 31, 2023 and 2022 resulted in a negative impact of $6 million, and $19 million and $10 million in the nine months ended March 31, 2023 and 2022, respectively, in foreign currency transaction losses that were reflected in the unaudited condensed consolidated statements of income.

Results of Operations - Three Months Ended March 31, 2023

Consolidated Results of Operations


	Three Months Ended March 31,
($ in millions, except per share data)	2023			2022
Net sales	$	3,667		$	3,708
Operating income	282			369
Operating income as a percentage of net sales	7.7		%	10.0		%

Net income attributable to Amcor plc	$	177		$	269
Diluted Earnings Per Share	$	0.119		$	0.178

Net sales decreased by $41 million, or 1%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. Excluding the pass-through of raw material costs of $81 million, negative currency impacts of $67 million, and negative impact of acquisitions, disposed, and ceased operations of $87 million, the remaining variation in net sales for the three months ended March 31, 2023 was an increase of $32 million, or 1%, reflecting price/mix benefit of 4% and unfavorable volumes of (3%).

Net income attributable to Amcor plc decreased by $92 million, or 34%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, mainly from a decrease in gross profit of $58 million, an increase in restructuring and related costs of $41 million, and higher net interest expense of $40 million, partially offset by a decrease in income tax expense of $38 million and a decrease in selling, general, and administrative expenses of $9 million.

Diluted earnings per share ("Diluted EPS") decreased by $0.059, or 33%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, with the net income available to ordinary shareholders of Amcor plc decreasing by 34% and the diluted weighted average number of shares outstanding decreasing by 2%. The decrease in the diluted weighted-average number of shares outstanding was due to the repurchase of shares under previously announced share buyback programs.

Segment Results of Operations

Flexibles Segment


	Three Months Ended March 31,
($ in millions)	2023			2022
Net sales	$	2,787		$	2,837
Adjusted EBIT	337			378
Adjusted EBIT as a percentage of net sales	12.1		%	13.3		%

Net sales decreased by $50 million, or 2%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. Excluding the pass-through of higher raw material costs of $33 million, negative currency impacts of $59 million, and negative impact of acquisitions, disposed, and ceased operations of $87 million, the remaining variation in net sales for the three months ended March 31, 2023, was an increase of $63 million, or 2%, reflecting favorable price/mix of 5%, and unfavorable volumes of (3%).

Adjusted earnings before interest and tax ("Adjusted EBIT") decreased by $41 million or 11% for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. Excluding negative currency impacts of $5 million and the negative net impact of acquisitions, disposed, and ceased operations of $31 million, the remaining decrease in Adjusted EBIT for the three months ended March 31, 2023, was $5 million, or 1%, reflecting favorable price/mix of 20%, more than offset by unfavorable volume of (8%), unfavorable plant costs of (10%), unfavorable SG&A and other costs of (3%), all largely impacted by inflationary pressures.

Rigid Packaging Segment


	Three Months Ended March 31,
($ in millions)	2023			2022
Net sales	$	880		$	871
Adjusted EBIT	69			77
Adjusted EBIT as a percentage of net sales	7.8		%	8.9		%

Net sales increased by $9 million, or 1%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. Excluding the pass-through of raw material costs of $47 million and negative currency impacts of $6 million, the remaining variation in net sales for the three months ended March 31, 2023 was a decrease of $32 million, or 4%, reflecting unfavorable volumes.

Adjusted EBIT decreased by $8 million, or 10%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. Excluding negative currency impacts of $1 million, the remaining decrease in Adjusted EBIT for the three months ended March 31, 2023, was $7 million, or 9%, with favorable price/mix of 15%, more than offset by unfavorable volumes of (15%), unfavorable plant costs of (6%) driven primarily by inflation on operating costs including higher energy and labor costs, and unfavorable SG&A and other costs of (3%).

Consolidated Gross Profit


	Three Months Ended March 31,
($ in millions)	2023			2022
Gross profit	$	673		$	731
Gross profit as a percentage of net sales	18.4		%	19.7		%

Gross profit decreased by $58 million, or 8%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The decrease was primarily driven by the impact of disposed and ceased operations of $38 million, and lower volumes. Gross profit as a percentage of sales decreased to 18.4% for the three months ended March 31, 2023, mainly from the impact from disposed operations and 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


	Three Months Ended March 31,
($ in millions)	2023			2022
Selling, general, and administrative expenses	$	(317)		$	(326)
Selling, general, and administrative expenses as a percentage of net sales	(8.6)		%	(8.8)		%

Selling, general, and administrative expenses decreased by $9 million, or 3%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The decrease was primarily driven by foreign currency exchange rate movements.

Consolidated Restructuring and Other Related Activities, Net


	Three Months Ended March 31,
($ in millions)	2023			2022
Restructuring and other related activities, net	$	(50)		$	(9)
Restructuring and other related activities, net, as a percentage of net sales	(1.4		%)	(0.2		%)

Restructuring and other related activities, net, increased by $41 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily as a result of $42 million of restructuring and related costs recognized relating to the 2023 Restructuring Plan.

Consolidated Interest Income


	Three Months Ended March 31,
($ in millions)	2023			2022
Interest income	$	15		$	5
Interest income as a percentage of net sales	0.4		%	0.1		%

Interest income increased by $10 million, or 200% for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, driven by increased interest rates on cash balances.

Consolidated Interest Expense


	Three Months Ended March 31,
($ in millions)	2023			2022
Interest expense	$	(86)		$	(36)
Interest expense as a percentage of net sales	(2.3		%)	(1.0)		%

Interest expense increased by $50 million, or 139%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, driven by increased interest rates on variable rate debt.

Consolidated Income Tax Expense


	Three Months Ended March 31,
($ in millions)	2023			2022
Income tax expense	$	(34)		$	(72)
Effective income tax rate	16.0		%	21.0		%

The provision for income taxes for the three months ended March 31, 2023 and 2022 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 March 31, 2023 decreased by 5.0 percentage points compared to the three months ended March 31, 2022, primarily due to differences in the the income mix and discrete events.

Results of Operations - Nine Months Ended March 31, 2023

Consolidated Results of Operations


	Nine Months Ended March 31,
($ in millions, except per share data)	2023			2022
Net sales	$	11,021		$	10,635
Operating income	$	1,183		$	987
Operating income as a percentage of net sales	10.7		%	9.3		%

Net income attributable to Amcor plc	$	868		$	696
Diluted Earnings Per Share	$	0.581		$	0.456

Net sales increased by $386 million, or 4%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. Excluding the pass-through of raw material costs of $750 million, negative currency impacts of $438 million, and negative impact of acquisitions, disposed, and ceased operations of $108 million, the remaining increase in net sales for the nine months ended March 31, 2023 was $182 million, or 2%, reflecting favorable price/mix of 4% and unfavorable volumes of (2%).

Net income attributable to Amcor plc increased by $172 million, or 25%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022 mainly as a result of a pre-tax net gain of $215 million on the disposal of the Russian business and a decrease in income tax expense of $71 million, partially offset by a decrease in gross profit of $23 million and an increase in net interest expense of $89 million.

Diluted earnings per share increased by $0.125, or 27%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022, with the net income available to ordinary shareholders of Amcor plc increasing by 24% and the diluted weighted average number of shares outstanding decreasing 3% for the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022. The decrease in the diluted weighted average number of shares outstanding was due to the repurchase of shares under previously announced share buyback programs.

Segment Results of Operations

Flexibles Segment


	Nine Months Ended March 31,
($ in millions)	2023			2022
Net sales	$	8,378		$	8,184
Adjusted EBIT	$	1,043		$	1,069
Adjusted EBIT as a percentage of net sales	12.4		%	13.1		%

Net sales increased by $194 million, or 2%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. Excluding the pass-through of raw material costs of $492 million, negative currency impacts of $419 million, and negative impact of acquisitions, disposed, and ceased operations of $108 million, the remaining increase in net sales for the nine months ended March 31, 2023, was $229 million, or 3%, reflecting favorable price/mix of 5%, and unfavorable volumes of (2%).

Adjusted EBIT decreased by $26 million, or 2%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. Excluding negative currency impacts of $41 million and the negative impact of acquisitions, disposed, and ceased operations of $34 million, the remaining variation in Adjusted EBIT for the nine months ended March 31, 2023, was an increase of $49 million, or 5%, reflecting favorable price/mix of 18%, partially offset by unfavorable volumes of (3%), unfavorable plant costs of (6%), unfavorable SG&A and other costs of (4%), all largely impacted by inflationary pressures.

Rigid Packaging Segment


	Nine Months Ended March 31,
($ in millions)	2023			2022
Net sales	$	2,643		$	2,451
Adjusted EBIT	$	192		$	194
Adjusted EBIT as a percentage of net sales	7.3		%	7.9		%

Net sales increased by $192 million, or 8%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. Excluding the pass-through of raw material costs of $258 million and negative currency impacts of $18 million, the remaining variation in net sales for the nine months ended March 31, 2023 was a decrease of $48 million, or 2%, reflecting favorable price/mix of 1%, offset by unfavorable volume of (3%).

Adjusted EBIT decreased by $2 million, or 1%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. Excluding negative currency impacts of $2 million, Adjusted EBIT for the nine months ended March 31, 2023, was in line with Adjusted EBIT for the nine months ended March 31, 2022, reflecting favorable price/mix of 30%, offset by unfavorable volumes of (8%), unfavorable plant costs of (13%), and unfavorable SG&A and other costs of (9%).

Consolidated Gross Profit


	Nine Months Ended March 31,
($ in millions)	2023			2022
Gross profit	$	2,003		$	2,026
Gross profit as a percentage of net sales	18.2		%	19.1		%

Gross profit decreased by $23 million, or 1%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. Excluding negative currency impacts of $77 million, the negative impact from disposed and ceased operations of $45 million, the remaining variation in gross profit for the nine months ended March 31, 2023 was an increase of $99 million, reflecting favorable operating cost initiatives. Gross profit as a percentage of sales decreased to 18.2% for the nine months ended March 31, 2023, primarily due to the impact on the calculation from the pass-through of higher raw material costs during the current fiscal period.

Consolidated Selling, General, and Administrative ("SG&A") Expenses


	Nine Months Ended March 31,
($ in millions)	2023			2022
SG&A expenses	$	(917)		$	(942)
SG&A expenses as a percentage of net sales	(8.3		%)	(8.9		%)

SG&A expenses decreased by $25 million, or 3%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. The decrease was primarily driven by foreign currency exchange rate movements.

Consolidated Restructuring and Other Related Activities, Net


	Nine Months Ended March 31,
($ in millions)	2023			2022
Restructuring and other related activities, net	$	162		$	(27)
Restructuring and other related activities, net, as a percentage of net sales	1.5		%	(0.3		%)

Restructuring and other related activities, net, are favorable by $189 million for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. The change was mainly a result of a pre-tax net gain of $215 million on the disposal of the Russian business, partially offset by an increase in restructuring and related costs of $42 million related to the 2023 Restructuring Plan.

Consolidated Interest Income


	Nine Months Ended March 31,
($ in millions)	2023			2022
Interest income	$	35		$	15
Interest income as a percentage of net sales	0.3		%	0.1		%

Interest income increased by $20 million, or 133% for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022, driven by increased interest rates on cash balances.

Consolidated Interest Expense


	Nine Months Ended March 31,
($ in millions)	2023			2022
Interest expense	$	(224)		$	(115)
Interest expense as a percentage of net sales	(2.0		%)	(1.1		%)

Interest expense increased by $109 million, or 95%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022, driven by increased interest rates on variable rate debt.

Consolidated Income Tax Expense


	Nine Months Ended March 31,
($ in millions)	2023			2022
Income tax expense	$	(125)		$	(196)
Effective income tax rate	12.5		%	21.8		%

The provision for income taxes for the nine months ended March 31, 2023 and 2022 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 nine months ended March 31, 2023 decreased by 9.3 percentage points compared to the nine months ended March 31, 2022, primarily due to the non-taxable gain on the sale of the Russian business, differences in the income mix and discrete events.

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 economic hedging instruments on commercial paper, and impacts related to the Russia-Ukraine conflict. We note that while amortization of acquired intangible assets is excluded from non-GAAP adjusted financial measures, the revenue of the acquired entities and all other expenses unless otherwise stated, are reflected in Adjusted EBIT and adjusted net income and the acquired assets contribute to revenue generation.

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 and nine months ended March 31, 2023 and 2022 is as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
($ in millions)	2023		2022		2023		2022
Net income attributable to Amcor plc, as reported	$	177	$	269	$	868	$	696
Add: Net income attributable to non-controlling interests	2		2		6		7

Net income	179		271		874		703
Add: Income tax expense	34		72		125		196
Add: Interest expense	86		36		224		115
Less: Interest income	(15)		(5)		(35)		(15)
EBIT	284		374		1,188		999
Add: 2019 Bemis Integration Plan	—		9		—		26
Add: Amortization of acquired intangible assets from business combinations (1)	40		40		120		122
Add: Impact of hyperinflation (2)	6		6		19		10
Add: Net loss on disposals (3)	—		—		—		9
Add/(Less): Property and other (gains)/losses, net (5)	—		(4)		—		23
Add: Pension settlement (5)	—		—		—		3
Add/(Less): Russia-Ukraine conflict impacts (6)	48		—		(156)		—
Add: Other (7)	4		2		2		4
Adjusted EBIT	$	382	$	427	$	1,173	$	1,196
Less: Income tax expense	(34)		(72)		(125)		(196)
Less: Adjustments to income tax expense (8)	(15)		(13)		(45)		(36)
Less: Interest expense	(86)		(36)		(224)		(115)
Add: Interest income	15		5		35		15
Less: Net income attributable to non-controlling interests	(2)		(2)		(6)		(7)
Adjusted net income	$	260	$	309	$	808	$	857

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

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

(3)Net loss on disposals for the nine months ended March 31, 2022 includes an expense of $9 million from the disposal of non-core assets. Refer to Note 8, "Fair Value Measurements" for more information.

(4)Property and other (gains)/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.

(5)Pension settlement for the nine months ended March 31, 2022 relates to the purchase of a group annuity contract and transfer of pension plan assets and related benefit obligations. Refer to Note 10, "Components of Net Periodic Benefit Cost" for more information.

(6)Russia-Ukraine conflict impacts in the nine months ended March 31, 2023 include a pre-tax net gain on sale of Russian business of $215 million (refer to Note 3, "Restructuring and Other Related Activities, Net"), and incremental costs and restructuring incurred in connection with the conflict.

(7)Other includes restructuring expenses and fair value gains on economic hedges in the three and nine months ended March 31, 2023. For the three and nine months ended March 31, 2022, Other includes costs associated with the Bemis transaction.

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

Reconciliation of Net Debt

A reconciliation of total debt to net debt as of March 31, 2023 and June 30, 2022 is as follows:


($ in millions)	March 31, 2023		June 30, 2022
Current portion of long-term debt	$	13	$	14
Short-term debt	196		136
Long-term debt, less current portion	6,804		6,340
Total debt	7,013		6,490
Less cash and cash equivalents	564		775
Net debt	$	6,449	$	5,715

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 these 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


($ in millions)	Nine Months Ended March 31, 2023
Net sales - external	$	812
Net sales - to subsidiaries outside the Obligor Group	4
Total net sales	816

Gross profit	137





Net income	$	(59)

Net income attributable to non-controlling interests	—

Net income attributable to Obligor Group	$	(59)

Balance Sheets for Obligor Group


($ in millions)	March 31, 2023		June 30, 2022
Assets
Current assets - external	$	777	$	1,254
Current assets - due from subsidiaries outside the Obligor Group	94		83
Total current assets	871		1,337
Non-current assets - external	1,394		1,396
Non-current assets - due from subsidiaries outside the Obligor Group	9,535		10,978
Total non-current assets	10,929		12,374
Total assets	$	11,800	$	13,711
Liabilities
Current liabilities - external	$	1,434	$	2,014
Current liabilities - due to subsidiaries outside the Obligor Group	19		23
Total current liabilities	1,453		2,037
Non-current liabilities - external	6,922		6,456
Non-current liabilities - due to subsidiaries outside the Obligor Group	9,523		11,255
Total non-current liabilities	16,445		17,711
Total liabilities	$	17,898	$	19,748

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 March 31, 2023 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.

On March 22, 2023, we redeemed Euro bonds of a principal amount of €300 million (equivalent to $322 million) at maturity. The redemption was funded with commercial paper. The notes carried an interest rate of 2.75%.

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


	Nine Months Ended March 31,
($ in millions)	2023		2022
Net cash provided by operating activities	$	329	$	589
Net cash used in investing activities	(149)		(383)
Net cash provided by/(used in) financing activities	(372)		52

Cash Flow Overview

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased by $260 million for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. The decrease in cash flow is primarily driven by higher working capital outflows in the current period and by lower net income after excluding a non-cash gain on the sale of our Russian business.

Net Cash Used in Investing Activities

Net cash used in investing activities decreased by $234 million for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. The decrease is mainly driven by the disposal proceeds collected from the sale of the Russian business in the current period, partially offset by the acquisitions of DGPack s.r.o. and MDK Packaging Materials Co., Ltd, and additional investments in affiliated companies.

Net Cash Provided by/(used in) Financing Activities

Net cash from financing activities decreased by $424 million for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022. The change is primarily due to lower net debt drawdowns, partially offset by lower share buybacks in the current period as 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 two 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, from November 1, 2022, through June 30, 2023, settled monthly. In March 2023, we entered into another two interest rate swap contracts for a total notional amount of $1.2 billion. Under the terms of the contracts, we will pay a weighted average fixed rate of interest of 3.88% and receive a variable rate of interest based on 1-month Term SOFR. The swaps are effective as of July 1, 2023, and mature on June 30, 2024. The interest rate swap contracts economically hedge the SOFR component of our forecasted commercial paper issuances.

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 March 31, 2023, we were in compliance with all applicable covenants under our bank debt facilities.

Our net debt as of March 31, 2023 and June 30, 2022 was $6.4 billion and $5.7 billion, respectively.

Available Financing

As of March 31, 2023, we had undrawn credit facilities available in the amount of $0.7 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 March 31, 2023, the revolving senior bank debt facilities had an aggregate limit of $3.8 billion, of which $3.1 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 that ended September 30, 2022, a $0.1225 cash dividend per ordinary share during the second fiscal quarter that ended December 31, 2022, and a $0.1225 cash dividend per ordinary share during the third fiscal quarter that ended March 31, 2023.

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"). Further, on February 7, 2023, our Board of Directors approved an additional buyback of up to $100 million of ordinary shares and/or CDIs in the following twelve months. During the nine months ended March 31, 2023, we repurchased approximately $200 million of ordinary shares and CDIs in the aggregate, including transaction costs, or 18 million shares. The shares repurchased as part of the program were canceled upon repurchase.

We had cash outflows of $221 million and $133 million for the purchase of our shares in the open market and using forward contracts to purchase our own equity during the nine months ended March 31, 2023 and 2022, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of March 31, 2023 and June 30, 2022, we held treasury shares at a cost of $14 million and $18 million, representing 1 million and 2 million shares, respectively.

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