Ron Delia: Well, look, we have been big beneficiaries and we’ve driven a lot of consolidation over the years. I think what’s important is industry structure and industry dynamics at a segment level. The fact is that there are a lot of players that are very small in the industry. So when we think about our M&A agenda, it’s largely going to be bolt-on. We’ve been quite active even in the last 12, 15 months or so. We’ve done four small deals and you can continue to see, you can expect to continue to see us do that. Look, a lot of the value that comes out of those deals is cost synergies. I think that’s where most of the value is going to come from in this, particularly in this type of environment and we’re going to be active participants in the M&A space.
Operator: Your next question comes from the line of Nathan Reilly of UBS.
Nathan Reilly: Thanks, Ron. Just a follow-up in terms of free cash allocation point. Can you talk about where deleveraging sits in the context of the allocation of excess free cash flows?
Michael Casamento : Yes, I mean obviously we’re committed to an investment-grade balance sheet. And so for us, that kind of, we’ve had been in the range of 2.5x to 3x leverage for a long time and that’s where you should expect us to sit as we move forward. So to Ron’s point, as the earnings grow, the cash flow grows and we can reinvest that in the base business. So you should expect CapEx over a period of time to increase as well. So we’ve been increasing our level of CapEx to grow organically. That’s been in that 3% to 4% range. It’s now, as we look longer term, that’s probably going to be more in that 4% to 5% range. That’s going to drive the organic growth and we still have cash left over to invest in the M&A agenda as a priority and again grow earnings through that, create value and then do buybacks.
And so as you look at all that, that we would continue to maintain that leverage in that 2 .5x to 3x range. So that’s how you should think about it. The excess cash will be deployed in that way.
Operator: The next question from the line of John Purtell with Macquarie.
John Purtell: Good morning, Ron and Michael. Hi, Tracey. Just a couple of questions, if I could. The first is on BOP1, obviously there’s been concerns across the sector and it’s obviously all still sort of long term in terms of potential impacts on food consumption and packaging demand but still very early days but do you have any general observations, Mike?
Ron Delia: Yes, I do, John. I think firstly I would just yes, I just want to reinforce that we have seen no impact whatsoever on demand in our segments from reduced consumption resulting from these drugs so the first point I want to make is that we’ve seen no impact as of yet. I think in terms of trying to estimate the future impact, I think there’s some things that we, there’s plenty of things we don’t know and there’s some things that we do know based on history. I think what we don’t know is the rate of adoption of these drugs. We don’t know what the impact on total consumption will be. We don’t know what will happen when people go off the drugs in large numbers so there’s a number of unknowns that I think totally time will tell.
What we do know is the food and beverage industry over many, many years over decades has been fantastic at innovating to address consumer needs as they change and evolve over time. Think about the evolution towards lower fat, low sugar, less salt, organic. The food and beverage industry has navigated those trends really successfully through innovation and through adapting product portfolios to suit whatever consumers are prioritizing at that point in time. So we know that that’s been the history and that’s been the track record and I expect that would be the same going forward. And the other thing that we know is to the extent there’s reduction in portion sizes or serving sizes, it tends to and has historically been very good for packaging intensity.
And units of packaging have tended to go up as portions have gone down and as serving sizes have been reduced. So I think it’s early days, as you said. I would lean more on the things that we know to have been true historically and probably put more emphasis or more weight on those factors than the things that we don’t know at this stage.
John Purtell: Got it. Thank you. And just second question for Michael, if I could. Page 11 of the news release shows that reconciliation between reported and adjusted earnings. We can see that hyperinflation impacts were higher than last year and Russia-Ukraine costs were higher as well. So what were the key drivers of that? And should we expect to see those Russia-Ukraine costs reduce going forward? Thank you.
Michael Casamento : Yes, sure, John. I can take that one. Look, the Russia-Ukraine costs are really the, that’s the cost of the restructuring. So we’ve moved into the program and Ron touched on the program earlier, the structural program where we’ve committed to spend about $170 million in cash from the Russia proceeds across some plant closures, so there’ll be 7 to 10 plant closures, some SG&A rightsizing. And we’ve, so they are the restructuring costs there and they’re going to continue through the year. You’ll see those continue on. It’s, and obviously from that restructuring, we’re going to generate the $50 million in EBIT benefits, $35 million of which will come in H2 and then a further $15 million into FY25. So you should expect to see a continuation of some cost in that line.
In relation to Argentina there was, Argentina is a hyperinflation economy and we have to account for Argentina certain ways and really that’s just, there was a devaluation in August and that’s the devaluation impact on the monetary assets, which was higher than it was in the prior year. But again that seems to have eased at the moment, but we’ll see where that goes as we work through the year.
Operator: Your next question comes from the line of Brook Campbell-Crawford with Barrenjoey.
Brook Campbell: Good afternoon, thanks for taking my question. Ron, just earlier on, you mentioned about the destocking in healthcare segments likely to continue in the second half. Correct me if I’m wrong, I think you mentioned that. Just what, can you provide some color there on why you think that’s going to play out and why you might have more visibility on destocking in that part of the market versus other categories that you serve? Thanks.
