Packaging giant Amcor continues to enjoy life as a transplanted Aussie company in the very competitive US market and so are shareholders – higher sales, earnings, dividend and an increased buyback – not to mention the strategy of recapturing higher costs with some aggressive price rises.
December half year figures confirm the company seeing solid returns after it transplanted itself in the wake of the $US6.8 billion Bemis packaging takeover in 2019.
The Bemis deal certainly transformed Amcor and helps explain why it had to move its domicile to the US and out of the much smaller Australian economy and financial markets.
Sales rose 12% for the December half to $US6.927 billion, thanks to higher costs and unit sales.
That 12% rise included $US650 million in price increases as Amcor recovered higher raw material costs.
On a comparable constant current basis, Amcor said sales rose a more sedate 2%.
Adjusted EBIT (earnings before interest and tax) rose 5% to $US769 million for the half on a constant currency basis.
The quarterly dividend was lifted from 11.75 to 12 US cents per share and directors added $US200 million worth of shares to the existing buyback.
Holders of Amcor’s ADI’s on the ASX will receive an unfranked dividend of 16.85 AUS cents on 15 March. On the ASX, Amcor last traded at $16.96 on Tuesday.
Besides the higher dividend, Amcor said it repurchased 24.6 million shares (1.6% of outstanding shares) during the six months ended to December 31 for a total cost of $US295 million.
“In addition to $400 million announced previously, the Company expects to allocate a further $200 million of cash towards share repurchases, bringing the total expected for the 2022 fiscal year to approximately $600 million.
“The additional $US200 million of share repurchases is not expected to benefit EPS growth until fiscal 2023 as there will be no material impact on the weighted average number of shares outstanding in fiscal 2022,” Amcor explained.
The company also reaffirmed June 30, 2022 guidance of adjusted earnings per share growth “of approximately 7% to 11% on a comparable constant currency basis, or approximately 79.0 to 81.0 cents per share on a reported basis assuming current exchange rates prevail through fiscal 2022, Adjusted Free Cash Flow of approximately $US1.1 to $US1.2 billion.”
As well Amcor said there will be approximately $US600 million (previously $US400 million) of cash to be allocated towards share repurchases in fiscal 2022.
“The additional $200 million of share repurchases is not expected to benefit EPS growth until fiscal 2023 as there will be no material impact on the weighted average number of shares outstanding in fiscal 2022.”
The company said sales growth in North America was mostly driven by higher demand in the medical, condiments, drinks and confectionary markets. While cheese, coffee, and frozen food packaging volumes fell.
In Europe, demand for pet food, medical, coffee, and confectionary packaging offset declining demand for snack food packaging.
Amcor noted supply chain problems in its ‘rigid’ division, which makes drinks and hot fill containers. First half sales grew 4% year-on-year, but earnings dropped 13%.
“…the business in North America has been adversely impacted by industry-wide supply chain disruptions and shortages of key raw materials. Demand remained elevated in the beverage segment while the business continued to operate at full capacity and with low levels of inventory resulting in inefficiencies and higher costs,” the company said.
In the statement to the ASX CEO Ron Delia said: “Amcor delivered a solid first half result as our teams continue to successfully navigate a persistently challenging and dynamic operating environment.”
“Across the business we continued to prioritize our customers and our scale and operational agility enabled us to service demand in key segments, driving growth and sales mix improvements.
“At the same time, we implemented a broad range of actions to recover higher input costs and manage through general inflation. As a result, sales grew 12% and we delivered 9 percent adjusted EPS growth year to date,” he added.
“We remain confident in the outlook for fiscal year 2022, enabling us to reaffirm guidance and increase cash returns to shareholders.”
Amcor shares fell 3.5% to $16.36 after the half-year update in a market that was up more than 1.2% on the day.
