Michael Casamento
Executive Vice President and Chief Financial Officer at Amcor
Thanks, Ron, and hello everyone. Beginning with the Flexibles segment on Slide 6. Year-to-date net sales on a comparable constant currency basis were 8% lower, which largely reflects weaker volumes. Volumes were down 9% mainly due to lower market and customer demand and accelerated destocking. In North America, first half net sales declined at high single-digit rates driven by lower volumes in categories including meat, liquid beverage and healthcare, which more than offset growth in the condiment, snacks and confectionery categories.
In Europe, net sales declined at low double-digit rates driven by lower volumes, partly offset by price mix benefits. Volumes were lower in snacks, coffee, healthcare and in unconverted film and foil. This was partly offset by higher confectionary volumes. Across the Asian region, net sales were modestly higher than the prior year. Volume growth in Thailand, India and China helped offset lower volumes in the Southeast Asian healthcare business. In Latin America, net sales declined at high single-digit rates, driven by lower volumes mainly in Chile and Mexico, partly offset by growth in Brazil. First half adjusted EBIT was 5% lower than last year on a comparable constant currency basis. As a result of lower volumes, partly offset by favorable price mix benefits and ongoing actions taken to lower costs, increase productivity and strengthen operating cost performance.
EBIT margin of 12.6% was comparable to prior year, despite a 50 basis point unfavorable comparison related to the sale of our Russian business last year. For the December quarter, reported sales were down 9% on a comparable constant currency basis and price mix was relatively neutral compared with last year. Volumes were down 10% in the quarter, reflecting continued soft market and customer demand. Destocking also continued through the quarter, accelerating in the month of December and was particularly impactful in healthcare, where volumes were lower than last year by double-digits.
In response to market dynamics, the business continued to take decisive cost actions focusing on operating efficiencies, delivering procurement benefits, limiting discretionary spend and advancing structural cost reduction initiatives. This resulted in another quarter of strong performance, partly offsetting weaker volumes with adjusted EBIT declining 5% on a comparable constant currency basis.
Turning to Rigid Packaging on Slide 7. Year-to-date net sales on a comparable constant currency basis were 8% lower with price mix contributing around 1%. Volumes were down 9% for the first half with lower volumes in North America, partly offset by growth in Latin America. In North America, overall beverage volumes for the first half were 14% lower than last year, including a 13% reduction in hot fill beverage container volumes, due to lower consumer and customer demand and elevated levels of destocking through the first half.
In Latin America, volumes grew at mid single-digit rates with new business wins in Brazil, Peru and Colombia partly offsetting lower volumes in Mexico. Adjusted EBIT was 9% lower than last year on a comparable basis, reflecting lower volumes, partly offset by price mix benefits and favorable cost performance. For the December quarter, net sales were also down 10% on a comparable constant currency basis. Price mix contributed around 2% and volumes were down 12% for the quarter, reflecting lower volumes in North America, partly offset by new business wins driving mid single-digit growth in Latin America.
Overall, North American beverage volumes were 19% lower for the quarter, reflecting a high single-digit decline from destocking and some of our customers took action to significantly reduce inventories in both hot fill and cold fill categories. Volumes were also impacted in the high single-digit range by incrementally softer consumer and customer demand in Amcor's key end markets. In addition, we had net-new business wins in the hot fill category, which partly offset a loss in cold fill as we elected not to retain volumes that fell short of our profitability threshold. Second quarter adjusted EBIT declined by 12%, reflecting lower volumes, partly offset by benefits from continuing to proactively manage costs including realizing labor savings by taking more plant shutdown days to better align capacity with the market dynamics as well as driving procurement benefits.
Moving to cash and the balance sheet on Slide 8. As Ron covered earlier, adjusted free cash flow for the half came in more than $100 million ahead of last year with our teams continuing to make progress against our priority to reduce inventories and drive working capital improvements across the board. Our financial profile remains solid with leverage at 3.4 times, broadly in line with the first quarter and where we expected it to be as we cycle through temporary increases in working capital and given trailing 12 months EBITDA now fully reflects the divestiture of our Russian business. Looking ahead, we continue to expect leverage will decrease to approximately 3 times at the end of our fiscal year, supported by seasonally stronger earnings and cash flow in the second half.
This brings me to our outlook on Slide 9. As Ron mentioned earlier, we are reaffirming our full year guidance for adjusted EPS of $0.67 to $0.71 per share. We continue to expect the underlying business to contribute organic earnings growth in the plus or minus low single-digit range with share repurchases adding a benefit of approximately 2% and favorable currency translation contributing a benefit of up to 2%. This is offset by a negative impact of approximately 3% related to the sale of our Russian business in December '22, the impact of which was all in the first half. We also expect a negative impact of approximately 6% from higher interest and tax expense which takes into account our estimate for full year net interest expense of between $315 million to $330 million, which is modestly lower than where we were forecasting last quarter.
Our full year tax rate expectations are unchanged in the range of 18% to 20%. In relation to phasing, we believe that December quarter marks the low point in terms of Amcor's earnings growth and volume declines. January volumes have improved following heavy customer destocking in December, and while we expect market dynamics to remain volatile in the near term, our volume trajectory is expected to continue to improve through the balance of the year. We anticipate Q3 volumes will be down in the mid single-digit range and expect fourth quarter volume declines in the low single-digit range.
Taking into account offsetting benefits from cost reduction initiatives and a reduced headwind from higher interest cost compared with last year, we expect third quarter adjusted EPS to be down mid single-digits on a comparable constant currency basis. And for the fourth quarter, we expect adjusted EPS to increase by mid single-digits over the prior year. A normal talk through the factors that support this return to growth shortly. Adjusted free cash flow continues to trend better than last year as we expected and we are again reaffirming our guidance range of $850 million to $950 million for our fiscal '24 year, which will be up to $100 million higher compared with last year. Our plan to repurchase at least $70 million of Amcor shares in '24 is unchanged and we continue to pursue value-creating M&A opportunities.
With that, I'll hand back to Ron.
