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 2023 filed with the U.S. Securities and Exchange Commission (the "SEC") on August 17, 2023, 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 December 31,								Six Months Ended December 31,
($ in millions)	2023				2022				2023				2022
Net sales	$	3,251	100.0	%	$	3,642	100.0	%	$	6,694	100.0	%	$	7,354	100.0	%
Cost of sales	(2,630)		(80.9	%)	(2,980)		(81.8	%)	(5,428)		(81.1	%)	(6,024)		(81.9	%)

Gross profit	621		19.1	%	662		18.2	%	1,266		18.9	%	1,330		18.1	%

Operating expenses:
Selling, general, and administrative expenses	(299)		(9.2	%)	(298)		(8.2	%)	(601)		(9.0	%)	(600)		(8.2	%)
Research and development expenses	(28)		(0.9	%)	(24)		(0.7	%)	(55)		(0.8	%)	(49)		(0.7	%)
Restructuring and other related activities, net	(24)		(0.7	%)	213		5.8	%	(52)		(0.8	%)	212		2.9	%
Other income/(expenses), net	(28)		(0.9	%)	6		0.2	%	(46)		(0.7	%)	8		0.1	%

Operating income	242		7.4	%	559		15.3	%	512		7.6	%	901		12.3	%

Interest income	11		0.3	%	11		0.3	%	21		0.3	%	20		0.3	%
Interest expense	(89)		(2.7	%)	(79)		(2.2	%)	(174)		(2.6	%)	(138)		(1.9	%)
Other non-operating income, net	1		—	%	3		0.1	%	—		—	%	3		—	%

Income before income taxes and equity in loss of affiliated companies	165		5.1	%	494		13.6	%	359		5.4	%	786		10.7	%

Income tax expense	(28)		(0.9	%)	(33)		(0.9	%)	(67)		(1.0	%)	(91)		(1.2	%)
Equity in loss of affiliated companies, net of tax	(1)		—	%	—		—	%	(2)		—	%	—		—	%

Net income	$	136	4.2	%	$	461	12.7	%	$	290	4.3	%	$	695	9.5	%

Net income attributable to non-controlling interests	(2)		(0.1	%)	(2)		(0.1	%)	(4)		(0.1	%)	(4)		(0.1	%)

Net income attributable to Amcor plc	$	134	4.1	%	$	459	12.6	%	$	286	4.3	%	$	691	9.4	%

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 2023, Amcor generated $14.7 billion in net sales.

Significant Developments Affecting the Periods Presented

Economic and Market Conditions

As anticipated, market conditions have continued to remain challenging in the first half of fiscal year 2024, with softer customer demand and increased destocking in the second quarter, particularly in December, of fiscal year 2024. We also continue to be impacted by higher inflation in certain areas, such as 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 has resulted in higher interest expense on our variable rate debt, particularly on U.S. dollar and Euro denominated debt in the first half of fiscal year 2024 compared to the same period in fiscal year 2023.

The underlying causes for the continued market volatility can be attributed to a variety of factors, such as the Russia-Ukraine and the Gaza-Israel conflicts and higher inflation in many economies, which have resulted in increased volatility in food and other markets and impacted global economies. In this context, we remain focused on taking price and cost actions to offset inflation, aligning our cost base with market dynamics, and managing working capital. Improved operating leverage, combined with known benefits in the second half of fiscal year 2024, which include the elimination of the earnings headwinds from the sale of the three manufacturing facilities in Russia ("Russian business"), a lower interest expense headwind, and the realization of structural cost reduction and productivity initiatives, is expected to result in improved earnings in the second half of fiscal year 2024. However, there is no assurance that we will meet our performance expectations or that ongoing geopolitical tensions and other factors will not negatively impact our financial results.

Russia-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 our Russian business until its 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"). We expect total Plan cash and non-cash net expenses of approximately $230 million. Of the remaining cash received from the sale of the Russian business, we allocated $100 million to the repurchase of additional shares and the remainder was used to reduce debt.

As of December 31, 2023, we have initiated restructuring and related projects with an expected net cost of approximately $210 million, of which approximately $110 million is expected to result in net cash expenditures. From the initiation of the Plan until December 31, 2023, we have incurred $77 million in employee-related expenses, $25 million in fixed asset related expenses, $27 million in other restructuring, and $13 million in restructuring related expenses. The Plan has resulted in $49 million of cash outflows to date.

Management initiated other restructuring actions in the fourth quarter of fiscal year 2022 to help mitigate the impact of the Russian sale. Management expects to realize an annualized pre-tax benefit of approximately $50 million from structural cost reduction actions taken as a result of all Russia related restructuring by the end of fiscal year 2025.

For further information, refer to Note 5, "Restructuring," of Part I, "Item 1, Notes to Condense d 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 was 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. Following the governmental election in the three months ended December 31, 2023, Argentina devalued the Argentine Peso by approximately 55% against the U.S. dollar. As a result, highly inflationary accounting in the three months ended December 31, 2023 and 2022 resulted in a negative impact on monetary assets of $34 million and $5 million, respectively, and $51 million and $13 million in the six months ended December 31, 2023 and 2022, respectively, in foreign currency transaction losses that were reflected in the unaudited condensed consolidated statements of income. Our operations in Argentina represented approximately 2% of our consolidated net sales and annual adjusted earnings before interest and tax in fiscal years 2023 and 2022.

Results of Operations - Three Months Ended December 31, 2023

Consolidated Results of Operations


	Three Months Ended December 31,
($ in millions, except per share data)	2023			2022
Net sales	$	3,251		$	3,642
Operating income	242			559
Operating income as a percentage of net sales	7.4		%	15.3		%

Net income attributable to Amcor plc	$	134		$	459
Diluted Earnings Per Share	$	0.092		$	0.307

Net sales decreased by $391 million, or 11%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Excluding the positive currency impacts of $72 million, the negative impacts from the pass-through of lower raw material costs of approximately $30 million, and the negative impact from the disposed Russian business of $85 million, the remaining variation in net sales for the three months ended December 31, 2023 was a decrease of $348 million, or 10%, reflecting lower volumes.

Net income attributable to Amcor plc decreased by $325 million, or 71%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, mainly due to the non-recurrence of a pre-tax net gain of $215 million on disposal of the Russian business in the three months ended December 31, 2022, a decrease in gross profit of $41 million, a decrease in other income of $34 million, an increase in restructuring and related expenses, net, of $22 million, and higher net interest expense of $10 million.

Diluted earnings per share ("Diluted EPS") decreased by $0.215, or 70%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, with the net income available to ordinary shareholders of Amcor plc decreasing by 71% due to the above items and the diluted weighted average number of shares outstanding decreasing by 3%. The decrease in the diluted weighted average number of shares outstanding was largely due to the repurchase of shares under previously announced share buyback programs.

Segment Results of Operations

Flexibles Segment


	Three Months Ended December 31,
($ in millions)	2023			2022
Net sales	$	2,481		$	2,812
Adjusted EBIT	312			353
Adjusted EBIT as a percentage of net sales	12.6		%	12.6		%

Net sales decreased by $331 million, or 12%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Excluding the positive currency impacts of $63 million, the negative impacts from the pass-through of lower raw material costs of approximately $45 million, and the negative impact from the disposed Russian business of $85 million, the remaining variation in net sales for the three months ended December 31, 2023 was a decrease of $264 million, or 9%, reflecting sales from acquired businesses of 1% and unfavorable volumes of 10% as a result of persistently broad based lower market and customer demand as well as accelerated destocking, particularly in December.

Adjusted earnings before interest and tax ("Adjusted EBIT") decreased by $41 million or 12% for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Excluding positive currency impacts of $6 million and the negative net impact from the disposed Russian business of $29 million, the remaining decrease in Adjusted EBIT for the three months ended December 31, 2023, was $18 million, or 5%, reflecting the net negative effect of 6% from unfavorable volumes and favorable operating cost performance, partially offset by favorable price/mix of 1%.

Rigid Packaging Segment


	Three Months Ended December 31,
($ in millions)	2023			2022
Net sales	$	770		$	830
Adjusted EBIT	51			57
Adjusted EBIT as a percentage of net sales	6.6		%	6.9		%

Net sales decreased by $60 million, or 7%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Excluding the positive currency impacts of $10 million and the positive impact from the pass-through of higher raw material costs of approximately $15 million, the remaining variation in net sales for the three months ended December 31, 2023 was a decrease of $85 million, or 10%, reflecting price/mix benefits of 2% and unfavorable volumes of 12% predominantly reflecting an incremental weaker consumer and customer demand and significant destocking.

Adjusted EBIT decreased by $6 million, or 11%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Excluding the positive currency impacts of $1 million, the remaining variation in Adjusted EBIT for the three months ended December 31, 2023 was a decrease of $7 million, or 12%, reflecting the net negative effect of 29% from unfavorable volumes and favorable operating cost performance, partly offset by favorable price/mix of 17%.

Consolidated Gross Profit


	Three Months Ended December 31,
($ in millions)	2023			2022
Gross profit	$	621		$	662
Gross profit as a percentage of net sales	19.1		%	18.2		%

Gross profit decreased by $41 million, or 6%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. The decrease was primarily driven by the impact of the disposed Russian business and lower volumes. Gross profit as a percentage of sales increased to 19.1% for the three months ended December 31, 2023, driven by an improvement in operating cost performance.

Consolidated Research And Development Expenses


	Three Months Ended December 31,
($ in millions)	2023			2022
Research and development expenses	$	(28)		$	(24)
Research and development expenses as a percentage of net sales	(0.9		%)	(0.7		%)

Research and development expenses increased by $4 million, or 17%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. The increase was due to continued investment in our research and development organization to further progress towards our innovation and sustainability goals.

Consolidated Restructuring and Other Related Activities, Net


	Three Months Ended December 31,
($ in millions)	2023			2022
Restructuring and other related activities, net	$	(24)		$	213
Restructuring and other related activities, net, as a percentage of net sales	(0.7		%)	5.8		%

Restructuring and other related activities, net, changed by $237 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. The change was mainly a result of a pre-tax net gain of $215 million on the disposal of the Russian business in three months ended December 31, 2022 and an increase in restructuring and related expenses, net, of $22 million, primarily related to the 2023 Restructuring Plan.

Consolidated Other Income/(Expenses), Net


	Three Months Ended December 31,
($ in millions)	2023			2022
Other income/(expenses), net	$	(28)		$	6
Other income/(expenses), net as a percentage of net sales	(0.9		%)	0.2		%

Other income/(expenses), net changed by $34 million, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, primarily from the adverse impact of the devaluation of the Argentine Peso.

Consolidated Interest Expense


	Three Months Ended December 31,
($ in millions)	2023			2022
Interest expense	$	(89)		$	(79)
Interest expense as a percentage of net sales	(2.7		%)	(2.2		%)

Interest expense increased by $10 million, or 13%, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, driven primarily by increased variable interest rates.

Consolidated Income Tax Expense


	Three Months Ended December 31,
($ in millions)	2023			2022
Income tax expense	$	(28)		$	(33)
Effective income tax rate	17.0		%	6.7		%

The provision for income taxes for the three months ended December 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 equity in loss of affiliated companies, 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 December 31, 2023 increased by 10.3 percentage points compared to the three months ended December 31, 2022, primarily due to the difference in the magnitude of discrete events in both periods, mainly driven by tax benefits attributable to the disposal of the Russian business in the three months ended December 31, 2022.

Results of Operations - Six Months Ended December 31, 2023

Consolidated Results of Operations


	Six Months Ended December 31,
($ in millions, except per share data)	2023			2022
Net sales	$	6,694		$	7,354
Operating income	$	512		$	901
Operating income as a percentage of net sales	7.6		%	12.3		%

Net income attributable to Amcor plc	$	286		$	691
Diluted Earnings Per Share	$	0.198		$	0.461

Net sales decreased by $660 million, or 9%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Excluding the positive currency impacts of $154 million, the negative impacts from the pass-through of lower raw material costs of approximately $85 million, and the negative impact from the disposed Russian business of $156 million, the remaining decrease in net sales for the six months ended December 31, 2023 was $573 million, or 8%, reflecting favorable price/mix of 1% and unfavorable volumes of 9%.

Net income attributable to Amcor plc decreased by $405 million, or 59%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, mainly due to the non-recurrence of the pre-tax net gain of $215 million on disposal of the Russian business in the six months ended December 31, 2022, a decrease in gross profit of $64 million, a decrease in other income of $54 million, an increase in restructuring and related expenses, net, of $49 million, and higher net interest expense of $35 million.

Diluted earnings per share decreased by $0.263, or 57%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, with the net income available to ordinary shareholders of Amcor plc decreasing by 58% due to the above items and the diluted weighted average number of shares outstanding decreasing by 3% for the six months ended December 31, 2023 compared to the six months ended December 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


	Six Months Ended December 31,
($ in millions)	2023			2022
Net sales	$	5,049		$	5,591
Adjusted EBIT	$	634		$	706
Adjusted EBIT as a percentage of net sales	12.6		%	12.6		%

Net sales decreased by $542 million, or 10%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Excluding the positive currency impacts of $135 million, the negative impacts from the pass-through of lower raw material costs of approximately $90 million, and the negative impact from the disposed Russian business of $156 million, the remaining variation in net sales for the six months ended December 31, 2023 was a decrease of $431 million, or 8%, reflecting price/mix benefits and sales from acquired businesses of 1% and unfavorable volumes of 9%, mainly reflecting persistently lower market and customer demand and accelerated destocking in the second quarter of fiscal year 2024.

Adjusted EBIT decreased by $72 million, or 10%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Excluding positive currency impacts of $13 million and the negative net impact from the disposed Russian business of $50 million, the remaining decrease in Adjusted EBIT for the six months ended December 31, 2023, was $35 million, or 5%, reflecting the net negative effect of 13% from unfavorable volumes and favorable operating cost performance, partly offset by favorable price/mix of 8%.

Rigid Packaging Segment


	Six Months Ended December 31,
($ in millions)	2023			2022
Net sales	$	1,645		$	1,763
Adjusted EBIT	$	113		$	123
Adjusted EBIT as a percentage of net sales	6.9		%	7.0		%

Net sales decreased by $118 million, or 7%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Excluding the positive currency impacts of $18 million, the positive impact from the pass-through of higher raw material costs of approximately $5 million, the remaining variation in net sales for the six months ended December 31, 2023 was a decrease of $141 million, or 8%, reflecting price/mix benefits of 1% and unfavorable volumes of 9%, predominantly reflecting a combination of lower consumer and customer demand, as well as destocking, particularly in the second quarter of fiscal year 2024.

Adjusted EBIT decreased by $10 million, or 8%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Excluding the positive currency impacts of $1 million, the remaining variation in Adjusted EBIT for the six months ended December 31, 2023 was a decrease of $11 million, or 9%, reflecting the net negative effect of 24% from unfavorable volumes and favorable operating cost performance, partly offset by favorable price/mix of 15%.

Consolidated Gross Profit


	Six Months Ended December 31,
($ in millions)	2023			2022
Gross profit	$	1,266		$	1,330
Gross profit as a percentage of net sales	18.9		%	18.1		%

Gross profit decreased by $64 million, or 5%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The decrease was primarily driven by the impact of the disposed Russian business and lower volumes. Gross profit as a percentage of sales increased to 18.9% for the six months ended December 31, 2023, driven by favorable price/mix and an improvement in operating cost performance.

Consolidated Research And Development Expenses


	Six Months Ended December 31,
($ in millions)	2023			2022
Research and development expenses	$	(55)		$	(49)
Research and development expenses as a percentage of net sales	(0.8		%)	(0.7		%)

Research and development expenses increased by $6 million, or 12%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The increase was due to continued investment in our research and development organization to further progress towards our innovation and sustainability goals.

Consolidated Restructuring and Other Related Activities, Net


	Six Months Ended December 31,
($ in millions)	2023			2022
Restructuring and other related activities, net	$	(52)		$	212
Restructuring and other related activities, net, as a percentage of net sales	(0.8		%)	2.9		%

Restructuring and other related activities, net, changed by $264 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The change was mainly a result of a pre-tax net gain of $215 million on the disposal of the Russian business in the six months ended December 31, 2022, and an increase in restructuring and related expenses, net, of $49 million, primarily related to the 2023 Restructuring Plan.

Consolidated Other Income/(Expenses), Net


	Six Months Ended December 31,
($ in millions)	2023			2022
Other income/(expenses), net	$	(46)		$	8
Other income/(expenses), net as a percentage of net sales	(0.7		%)	0.1		%

Other income/(expenses), net changed by $54 million, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, primarily from the adverse impact of the devaluation of the Argentine Peso.

Consolidated Interest Expense


	Six Months Ended December 31,
($ in millions)	2023			2022
Interest expense	$	(174)		$	(138)
Interest expense as a percentage of net sales	(2.6		%)	(1.9		%)

Interest expense increased by $36 million, or 26%, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, driven primarily by increased variable interest rates.

Consolidated Income Tax Expense


	Six Months Ended December 31,
($ in millions)	2023			2022
Income tax expense	$	(67)		$	(91)
Effective income tax rate	18.7		%	11.6		%

The provision for income taxes for the six months ended December 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 equity in loss of affiliated companies 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 six months ended December 31, 2023 increased by 7.1 percentage points compared to the six months ended December 31, 2022, primarily due to the difference in the magnitude of discrete events in both periods, mainly driven by tax benefits attributable to the disposal of the Russian business in the six months ended December 31, 2022.

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 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 regulatory and litigation matters, significant pension settlements, impairments in goodwill and equity method investments, and certain acquisition-related expenses, including transaction and integration expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, order backlog, intangible amortization, changes in the fair value of contingent acquisition payments and economic hedging instruments on commercial paper, and impacts related to the Russia-Ukraine conflict. 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 Adjusted EBIT, and adjusted net income for the three and six months ended December 31, 2023 and 2022 is as follows:


	Three Months Ended December 31,				Six Months Ended December 31,
($ in millions)	2023		2022		2023		2022
Net income attributable to Amcor plc, as reported	$	134	$	459	$	286	$	691
Add: Net income attributable to non-controlling interests	2		2		4		4

Net income	136		461		290		695
Add: Income tax expense	28		33		67		91
Add: Interest expense	89		79		174		138
Less: Interest income	(11)		(11)		(21)		(20)
EBIT	242		562		510		904

Add: Amortization of acquired intangible assets from business combinations (1)	43		40		83		80
Add: Impact of hyperinflation (2)	34		5		51		13



Add/(Less): Restructuring and other related activities, net (3)	24		(207)		52		(204)
Add/(Less): Other (4)	9		(1)		13		(2)
Adjusted EBIT	$	352	$	399	$	709	$	791
Less: Income tax expense	(28)		(33)		(67)		(91)
Less: Adjustments to income tax expense (5)	(17)		(19)		(32)		(30)

Less: Interest expense	(89)		(79)		(174)		(138)
Add: Interest income	11		11		21		20
Less: Net income attributable to non-controlling interests	(2)		(2)		(4)		(4)
Adjusted net income	$	227	$	277	$	453	$	548

(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)Restructuring and other related activities, net includes incremental costs incurred in connection with the Russia-Ukraine conflict in fiscal year 2023.

(4)Other includes various expense and income items relating to acquisitions, retroactive foil duties, certain litigation reserve settlements, and fair value movements on economic hedges.

(5)Net tax impact on items (1) through (4) above.

Reconciliation of Net Debt

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


($ in millions)	December 31, 2023		June 30, 2023
Current portion of long-term debt	$	12	$	13
Short-term debt	46		80
Long-term debt, less current portion	7,011		6,653
Total debt	7,069		6,746
Less cash and cash equivalents	430		689
Net debt	$	6,639	$	6,057

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
$500 million, 5.625% Guaranteed Senior Notes due 2033 of Amcor Finance (USA), Inc.

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

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, Amcor Finance (USA), Inc. is incorporated in Delaware in the United States, 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.

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

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)	Six Months Ended December 31, 2023
Net sales - external	$	476
Net sales - to subsidiaries outside the Obligor Group	2
Total net sales	478

Gross profit	83





Net income	$	130

Net income attributable to non-controlling interests	—

Net income attributable to Obligor Group	$	130

Balance Sheets for Obligor Group


($ in millions)	December 31, 2023		June 30, 2023
Assets
Current assets - external	$	1,579	$	1,184
Current assets - due from subsidiaries outside the Obligor Group	220		190
Total current assets	1,799		1,374
Non-current assets - external	1,458		1,415
Non-current assets - due from subsidiaries outside the Obligor Group	12,017		10,992
Total non-current assets	13,475		12,407
Total assets	$	15,274	$	13,781
Liabilities
Current liabilities - external	$	2,482	$	1,912
Current liabilities - due to subsidiaries outside the Obligor Group	45		37
Total current liabilities	2,527		1,949
Non-current liabilities - external	7,184		6,801
Non-current liabilities - due to subsidiaries outside the Obligor Group	10,891		9,917
Total non-current liabilities	18,075		16,718
Total liabilities	$	20,602	$	18,667

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 fiscal year ended June 30, 2023. There have been no material changes in critical accounting estimates and judgments as of December 31, 2023 from those described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

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.

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


	Six Months Ended December 31,
($ in millions)	2023		2022
Net cash provided by operating activities	$	228	$	145
Net cash (used in)/provided by investing activities	(256)		24
Net cash used in financing activities	(191)		(90)

Cash Flow Overview

Net Cash Provided by Operating Activities

Net cash provided by operating activities increased by $83 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The change is primarily driven by lower working capital outflows more than offsetting lower net income in the current period.

Net Cash (Used in)/Provided by Investing Activities

Net cash used in investing activities increased by $280 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The change is primarily driven by the disposal proceeds collected from the sale of the Russian business in the prior period, partially offset by lower outflows for investments in affiliated companies and business acquisitions compared to the prior period.

Net Cash Used in Financing Activities

Net cash used in financing activities increased by $101 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The change is primarily driven by lower net debt drawdowns in the current 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.

In March 2023, we entered into two interest rate swap contracts for a total notional amount of $1.2 billion. Under the terms of the contracts, we pay a weighted average fixed rate of interest of 3.88% and receive a variable rate of interest based on 1-month Term Secured Overnight Financing Rate ("SOFR"). The swaps have been 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 December 31, 2023, we were in compliance with all applicable covenants under our bank debt facilities.

Our net debt as of December 31, 2023 and June 30, 2023 was $6.6 billion and $6.1 billion, respectively.

Debt Facilities

As of December 31, 2023, we had undrawn credit facilities available in the amount of $1.0 billion. Our senior facilities are available to fund working capital, 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 us to extend the maturity date.

As of December 31, 2023, the revolving senior bank debt facilities had an aggregate limit of $3.8 billion, of which $2.8 billion had been drawn (inclusive of amounts drawn under commercial paper programs reducing the overall balance of available senior facilities). Subject to certain conditions, we can request the total commitment level under each agreement to be increased by up to $500 million.

Dividend Payments

We declared and paid a $0.1225 cash dividend per ordinary share during the three months ended September 30, 2023 and a $0.1250 cash dividend per ordinary share during the three months ended December 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 February 7, 2023, our Board of Directors approved a $100 million buyback of ordinary shares and/or CHESS Depositary Instruments ("CDIs") in the following twelve months. On February 6, 2024, our Board of Directors extended the approval for the remaining $39 million of ordinary shares and CDIs of the $100 million buyback until June 30, 2024. During the six months ended December 31, 2023, we repurchased approximately $30 million of ordinary shares and CDIs in the aggregate, including transaction costs, or 3 million shares. The shares repurchased as part of the program were canceled upon repurchase.

We had cash outflows of $48 million and $221 million for the purchase of our shares in the open market and using forward contracts to purchase our own equity during the six months ended December 31, 2023 and 2022, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of December 31, 2023 and June 30, 2023, we held treasury shares at a cost of $11 million and $12 million, respectively, representing 1 million shares.

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