Transplanted packaging giant Amcor says that while third quarter volumes fell in China because of continued COVID-19 lockdowns, demand was solid elsewhere as the company managed to protect margins with price rises to compensate for higher costs.
That saw group net sales rise 9% to $US3.7 billion (the rise was faster than inflation in the US, China and Australia).
Amcor said the 9% rise on a reported basis included price increases of approximately $US400 million (representing 12% growth) “related to the pass through of higher raw material costs and an unfavourable impact of 6% related to movements in foreign currency exchange rates.”
“Net sales on a comparable constant currency basis were 3% higher than the same period last year reflecting price/mix benefits. Volumes were 0.6% lower than last year” which is a sign of a slowing in demand from customers (China?)
Amcor said its adjusted earnings before interest and tax (EBIT) margin of 10.6% “was strong despite an adverse impact of 120 basis points related to the increased sales dollars associated with passing through higher raw material costs.”
As a result, the company saw a 9% rise in its adjusted EBIT to $US392 million, on a comparable constant currency basis.
CEO Ron Delia said: “Amcor delivered a strong first quarter highlighted by solid operating leverage with 3% organic sales growth driving a 10% increase in adjusted earnings per share on a comparable constant currency basis. Both the Flexibles and Rigid Packaging segments contributed to adjusted EBIT growth of 9% on a comparable constant currency basis.
“The result demonstrates the relative stability of our end market exposures, our relentless focus on recovering higher raw material costs and general inflation, and our proactive approach to driving costs out of the business.”
Quarterly dividend was again lifted with Amcor declaring a quarterly cash dividend of 12.25 cents a share, up from 12.00 cents a share in the same quarter last year). The dividend will be paid in US dollars to holders of Amcor’s ordinary shares trading on the New York exchange.
Holders of CDIs trading on the ASX will receive an unfranked dividend of 19.44 Australian cents per share, which reflects the quarterly dividend of 12.25 US cents per share converted at an AUD: USD average exchange rate of 0.6300 over the five trading days ended October 25, 2022.
As well as reaffirming 2023 guidance, Amcor also said it expects that approximately $US400 million of cash will be allocated towards share buybacks in the 2023 fiscal year.
All that fell on deaf ears on the ASX yesterday and the shares fell more than 4% to $17.38.
The fact that Amcor managed to cover cost rises with price increases should offset worries investors had earlier in the year that Amcor was finding it hard to recover higher costs from higher prices.
