Michael Casamento
Chief Financial Officer at Amcor
Thanks, Ron. I'm beginning with the Flexibles segment on Slide 6. The business performed well in the face of challenging macroeconomic conditions, executing to recover higher raw material costs, manage general inflation, improve cost performance and deliver solid mix benefits. Reported first half sales grew 5%, which included recovery of higher raw material costs of approximately $460 million, representing 9% of growth.
Our teams continue to do an excellent job passing on increases in commodity costs. And as expected, the related price-cost impact on earnings for the second quarter was modestly positive after being neutral in Q1. Excluding the raw material impact and negative currency movements, sales grew 3% for both the first half and December quarter, driven by favorable price/mix benefits of 4%, partly offset by modestly lower volumes.
As Ron mentioned, sales across our higher-value priority segments, which include health care, pet care and protein, remained strong, collectively growing at high-single-digit rates through the first half and contributing to positive price/mix. We also continued to see strong growth in our businesses in India and Southeast Asia, particularly in health care and media end markets. This helped limit the impact of lower volumes in some business units across categories, including coffee, dairy, condiments, confectionery and home and personal care, where we have seen varying degrees of customer destocking or lower demand.
Volumes were lower in China, due to COVID-related lockdowns and in Latin America, where inflationary pressures unfavorably impacted demand in several countries. In terms of earnings for Flexibles, we again demonstrated strong operating leverage. Adjusted EBIT grew -- of 8% for the half reflects ongoing price/mix benefits and favorable cost performance. Margins remained strong at 12.6%, despite the 120 basis point dilution related to increased sales dollars associated with passing through higher raw material costs.
Turning to Rigid Packaging on Slide 7. The business built on its first quarter performance with another quarter of solid earnings growth. First half sales increased by 12% on a reported basis, which included approximately $210 million or 13% of sales related to the pass-through of higher raw material costs. Organic sales declined by 1% for the half, reflecting 2% lower volumes, partly offset by a 1% price/mix benefit.
Looking at the December quarter, overall volumes declined by 5%, with the beverage business in North America and Latin America impacted by lower consumer demand and customer destocking. In North America, first half beverage volumes were down 5%. This included hot fill container volumes, which increased 2% in the half, but were down 2% in the December quarter, which was in line with the market.
Cold fill volumes were lower in the half and quarter, due to a combination of lower consumer demand and customer destocking. In Latin America, volumes were marginally higher for the first half with growth in Mexico and Argentina offset by lower volumes in Brazil. Consistent with what we saw in the Flexibles segment, the December quarter was unfavorably impacted by softer consumer demand in the region.
The Specialty Containers business delivered good performance with solid volume growth from health care, dairy and nutrition end markets. And overall adjusted EBIT for the Rigid segment in the first half increased 7% on a comparable constant currency basis, with our teams being able to adjust to evolving market conditions and improve operating cost performance.
Moving to cash on the balance sheet on Slide 8. We had a strong sequential improvement in adjusted free cash flow, which came in at $338 million for the December quarter, in line with last year. For the half year, cash outflow of $61 million was lower than last year, largely reflecting the unfavorable impact on the working capital cycle related to higher levels of inventory and higher raw material costs. These impacts also make our cash flow seasonality, which is, typically weighted to the second half of the year, more pronounced for fiscal '23.
Our financial profile remains strong with leverage at 2.8 times on a trailing 12 month EBITDA basis. This is in line with our expectations for this time of year, given the seasonality of cash flows and the receipt of proceeds from the Russia business sale. We repurchased $40 million worth of shares in the December quarter and expect to repurchase up to $500 million in total through the 2023 fiscal year.
Prior to turning to our outlook, I wanted to provide a few more comments about the completed sale of our Russian business. We received sale proceeds of $365 million, in addition to $65 million of cash which was repatriated upon completion. In terms of the use of total proceeds received, we expect to do three things. First, we will invest approximately $120 million in a range of cost-saving initiatives across the business to partly offset divested earnings. This is in addition to approximately $50 million of cash we allocated back in August for similar initiatives. Second, we plan to allocate up to $100 million for additional share repurchases. And finally, the balance is expected to be used to reduce net debt in proportion with divested EBITDA, maintaining our leverage ratio.
Taking us to the outlook on Slide 9. We are maintaining our guidance range for adjusted EPS of $0.77 to $0.81 per share, assuming current foreign exchange rates prevail through the balance of the year. As Ron mentioned, while we are taking aggressive action now to flex the cost base across the business, we expect the environment will remain volatile in the near term. And entering the second half of the fiscal year, we are more cautious in relation to the demand outlook and currently expect to be towards the lower end of our EPS guidance range.
Our earnings bridge on this slide lays out the elements underlying our expectations. We expect earnings growth of approximately 3% to 8% on a comparable constant currency basis to be comprised of approximately 5% to 10% growth from the underlying business and a benefit of approximately 2% from share repurchases. This will be partly offset by a negative impact of approximately 4% related to higher estimated interest and tax expense.
Our effective tax rate for 2023 is expected to be lower than last year, in the 18% to 19% range. However, the year-over-year benefit this provides is more than offset by higher interest expense. Now that we have clarity on the timing of the sale, we expect a negative impact of approximately 3% related to the divestiture of our three plants in Russia. In addition, the US dollar has weakened since our last update, and we now expect a negative impact of approximately 4% from currency translation movements. We are also reaffirming our adjusted free cash flow range for the year of $1 billion to $1.1 billion, although likely towards the lower end of the range as noted on last quarter's call.
So in summary from me today, the business has delivered another solid result, and we remain focused on supporting our customers and taking actions to continue recovering inflation and flex the cost base. Balancing these priorities will leave our business well positioned as we navigate through higher-than-usual volatility in demand and macroeconomic challenges in the near term.
With that, I'll hand back to Ron.