Mike Roxland: Thank you, Ron, Michael Tracey and David for taking my questions. Actually, just question just had one question really. The company has made solid progress, streamlined the portfolio, another $70 million, sub saving this quarter, closing plants, realigning production, headcount reduction. If when volumes begin to improve, should we expect to see a reversal of this and you putting more capital to work in new plants, increasing headcount? Or really does your existing footprint, as it stands today, have enough excess capacity to absorb incremental volumes without any additional investment?
Ron Delia: Yes, it’s a great question. I think the short answer is we’re going to be well set up when volumes come back and I think we’re going to get even stronger earnings leverage as volumes return. We’re taking really two sets of actions on the cost side. So the first, the $70 million that I referred to earlier that you just referenced is really ongoing productivity oriented benefits where we’re taking shifts out, reducing headcount, driving procurement, optimizing the overhead and SG&A part of the business, kind of steady state but aggressive belt tightening, I would say. That’s one form of cost reduction and I don’t think a lot of that, some of it will come back obviously as volumes come back you need to add. You might need to add shifts.
But we will be in a much better position from a leverage perspective as volumes return. So that’s on that side. The second stream of cost takeout relates to more structural initiatives, which are more of the restructuring type, which are plant closures and more permanent and more deep cutting overhead reductions. We really haven’t seen the benefits yet from those initiatives. Those will start to build in the second half, as Michael referred to earlier. We expect to get about $35 million of benefits from more structural initiatives in the second half. And those also will be long lasting and sustainable, because we’re going to be taking out several plants in the network that we can compensate for with the remaining footprint. And in many cases, when we close a facility, we relocate the productive assets into another facility, and we don’t really take capacity out necessarily.
So I think we’re going to be well positioned when and if volumes return.
Operator: Your next question comes from the line of Richard Johnson with Jefferies.
Richard Johnson: Thanks very much. Ron, can I just return to the subject of price, and in particular, the US protein market? I mean, I’m interested in the comments you make, and I’m just trying to reconcile that with what others in the market are saying, and they’re referring to significant overcapacity in that market, which makes sense given how weak the end market is, which is leading to acute price pressure because of that unused capacity. Just be interested to get your thoughts on that.
Ron Delia: Yes, I don’t know that the pricing pressure or the intensity of the competition is any more so at the moment in that segment than it has been in the past, or that it will be in the future. You have to remember as well that the assets that are deployed against that segment are fungible across a range of categories. So we have film assets that produce into the protein market, also produce specifications for dairy and a number of other segments as well. So it’s certainly not a market that we look at as being overly capitalized or having much excess capacity.
Richard Johnson: And then as you sort of spread that through the US around the different categories, I mean, can I extrapolate from your comments around how that you think positive price makes trend, that’s really across all the categories or are there any areas where price is starting to give back price, which inevitably you would expect given how far price has gone at some point that will normalize, correct?
Ron Delia: Look I think it’s going to be a function of inflation. The rate at which pricing changes in this industry I think from this point forward will be primarily a function of the rate and the direction of travel of inflation. It’s not been an industry over the years that’s had positive price in the absence of value, it’s been an industry that is compensated for inflationary cost pressures and I think that’s kind of where we’re at right now.
Operator: Your next question comes from the line of Cameron McDonald with E&P.
Cameron McDonald: Good morning, Ron, Michael. And can I just ask a question on slide 10? So you’ve got the average of high single digit of 8% from ‘14 to ‘23, but if we think about the environment, we had interest rates collapsed to zero during that period. You’ve had a significant transformational acquisition with Bemis. You’ve had the buybacks, et cetera. When you then talk about the high single digits expected long term, how do we marry that up? Or do you still think that there are significant M&A opportunities and the synergies that will create? And then but I suppose I come back to that interest rate environment; you’ve got a significantly higher interest rate that’s going to be impacting that EPS.
Ron Delia: Yes, look, it’s a good question because it’s really a segue into why we’re confident that we’re going to get back to kind of high single digit growth rates going forward. And we just believe in the conviction of our formula that served us well over many years and that is that volumes in a normal environment will grow sort of low single digits. We will get leverage in terms of higher rates of profit growth than that because the mix will improve over time and as we generate more productivity in our operations. So low single digit volume growth will translate into higher rates of profit growth. And then the business generates a substantial amount of cash and really excess cash, excess to the needs of the business from a CapEx perspective and to fund the dividend.
And with that extra cash, our first priority will be to do acquisitions as we’ve done over a long period of time and short of acquisition opportunities will buy back shares. And so you go from low single digit volume growth to something higher than that mid-single digit type profit growth organically and then the cash flow and balance sheet optionality to generate further EPS growth through either acquisitions or share repurchases. So that’s the formula. That’s the formula that’s delivered the 8% over almost a decade. And that’s the formula that we’ll expect to deliver the same types of earnings growth rates going forward.
Cameron McDonald: Thanks. There’s a follow up to that just on the M&A. When you think about the industry at the moment, you’ve spoken about the industry doesn’t really have real price power without value. You’ve got a changing expectation around sustainability. We’ve obviously seen WestRock and Smurfit get together. Do you think the industry needs to more significantly and aggressively consolidate to change some of those industry dynamics?
